** **

**FORM 10-Q**

 

**UnitedStates**

**Securitiesand Exchange Commission**

**Washington,D. C. 20549**

 

| ** ** | **(Mark  One)** | ** ** | ** **                                                  | ** ** |
|------------|-----------------|------------|-------------------------------------------------------------|------------|
| ** ** | **x**           | ** ** | **Quarterly  Report Pursuant to Section 13 or 15(d)**  | ** ** |
| ** ** | ** **      | ** ** | **of the  Securities Exchange Act of 1934**                 | ** ** |
| ** ** | ** **      | ** ** | ** **                                                  | ** ** |
| ** ** | ** **      | ** ** | **For the  quarterly period ended: February 29, 2008** | ** ** |
| ** ** | ** **      | ** ** | ** **                                                  | ** ** |
| ** ** | ** **      | ** ** | **OR**                                                      | ** ** |
| ** ** | ** **      | ** ** | ** **                                                  | ** ** |
| ** ** | **o**           | ** ** | **Transition  Report Pursuant to Section 13 or 15(d)** | ** ** |
| ** ** | ** **      | ** ** | **of the  Securities Exchange Act of 1934**                 | ** ** |

 
| **Commission  File Number: 0-14820** |
|--------------------------------------|

** **

| **IMMUCOR,  INC.**                                      |
|---------------------------------------------------------|
| (Exact name of  registrant as specified in its charter) |

 

| **Georgia**                      | ** ** | **22-2408354**       |
|----------------------------------|------------|----------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer     |
| incorporation or  organization)  |       | Identification  No.) |

 
| **3130 Gateway Drive P.O. Box 5625 Norcross,  Georgia 30091-5625** |
|-------------------------------------------------------------------------|
| (Address of principal executive offices)  (Zip Code)               |

 

| Registrant’s  telephone number: **(770) 441-2051** |
|---------------------------------------------------------|

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes  x        No  o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definitions of “large accelerated filer,”“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of theExchange Act. (Check one):

 

| Large accelerated filer  x                                             |   | Accelerated filer o          |
|------------------------------------------------------------------------|--------|------------------------------|
|                                                                   |   |                         |
| Non-accelerated filer o  (Do not check if a smaller reporting company) |   | Smaller reporting  company o |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

 

Yes  o       No x

 

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

 

As of March 28,2008: **Common Stock, $0.10 Par Value – 70,036,012**

 

 

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**IMMUCOR, INC. AND SUBSIDIARIES**

 

**FORM 10-Q**

 

**INDEX**

 
| **PART I.   FINANCIAL  INFORMATION** |
|----------------------------------------------------------|

 
|                                                   |                                                                                                                                                                 |
|--------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Item  1.**                                           | **Financial  Statements**                                                                                                                                            |
|                                                   |                                                                                                                                                                 |
|                                                   | Condensed Consolidated Balance Sheets as of  February 29, 2008 (unaudited) and May 31, 2007                                                                |
|                                                   |                                                                                                                                                                 |
|                                                   | Condensed  Consolidated Statements of Income for the three and nine months ended  February 29, 2008 and February 28, 2007 (unaudited)                      |
|                                                   |                                                                                                                                                                 |
|                                                   | Condensed  Consolidated Statement of Shareholders’ Equity and Comprehensive Income for  the period June 1, 2007 through February 29, 2008 (unaudited) |
|                                                   |                                                                                                                                                                 |
|                                                   | Condensed  Consolidated Statements of Cash Flows for the nine months ended  February 29, 2008 and February 28, 2007 (unaudited)                            |
|                                                   |                                                                                                                                                                 |
|                                                   | Notes to  Condensed Consolidated Financial Statements (unaudited)                                                                                                    |
|                                                   |                                                                                                                                                                 |
| **Item 2.**                                            | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**                                                                      |
|                                                   |                                                                                                                                                                 |
| **Item 3.**                                            | **Quantitative  and Qualitative Disclosures about Market Risk**                                                                                                      |
|                                                   |                                                                                                                                                                 |
| **Item 4.**                                            | **Controls and  Procedures**                                                                                                                                         |
|                                                   |                                                                                                                                                                 |   |
| **PART II.    OTHER  INFORMATION** |
|                                                   |                                                                                                                                                                 |
| **Item 1.**                                            | **Legal Proceedings**                                                                                                                                                |
| ** **                                             | ** **                                                                                                                                                           |
| **Item 1A.**                                           | **Risk Factors**                                                                                                                                                     |
| ** **                                             | ** **                                                                                                                                                           |
| **Item 2.**                                            | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                                                                                     |
| ** **                                             | ** **                                                                                                                                                           |
| **Item  6.**                                           | **Exhibits**                                                                                                                                                         |
| ** **                                             | ** **                                                                                                                                                           |
| ** **                                             | **SIGNATURES**                                                                                                                                                       |
|                                                        |                                                                                                                                                                      |  |  |

 

2

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**PART I**

**FINANCIAL INFORMATION**

**ITEM 1. Financial Statements**

** **

**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

(Amountsin thousands, except share data)

 
| ** **                                                                                                                                                                   | ** ** | **February 29, 2008** | ** ** | **May 31, 2007** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                                   | ** ** | **(unaudited)**                 | ** ** | ** **                 | ** ** |
| **ASSETS**                                                                                                                                                                   |       |                            |       |                       |       |
|                                                                                                                                                                         |       |                            |       |                       |       |
| CURRENT ASSETS:                                                                                                                                                              |       |                            |       |                       |       |
| Cash and cash  equivalents                                                                                                                                                   |       | $                               | 163,851    |                       | $          | 113,551 |   |
| Trade accounts  receivable, net of allowance for doubtful accounts of $1,916 at  February 29, 2008 and $1,726 at May 31, 2007                                                |       | 54,444                          |       | 47,768                     |       |
| Inventories                                                                                                                                                                  |       | 33,648                          |       | 29,320                     |       |
| Deferred income  tax assets, current portion                                                                                                                                 |       | 4,580                           |       | 3,614                      |       |
| Prepaid expenses  and other current assets                                                                                                                                   |       | 5,006                           |       | 5,567                      |       |
| Total current  assets                                                                                                                                                        |       | 261,529                         |       | 199,820                    |       |
|                                                                                                                                                                         |       |                            |       |                       |       |
| PROPERTY AND  EQUIPMENT, Net                                                                                                                                                 |       | 34,684                          |       | 30,245                     |       |
| GOODWILL                                                                                                                                                                     |       | 36,826                          |       | 34,763                     |       |
| INTANGIBLE  ASSETS, Net                                                                                                                                                      |       | 6,208                           |       | 5,719                      |       |
| DEFERRED INCOME  TAX ASSETS                                                                                                                                                  |       | 7,784                           |       | 4,225                      |       |
| OTHER ASSETS                                                                                                                                                                 |       | 1,007                           |       | 706                        |       |
| Total assets                                                                                                                                                                 |       | $                               | 348,038    |                       | $          | 275,478 |   |
|                                                                                                                                                                         |       |                            |       |                       |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                               |       |                            |       |                       |       |
|                                                                                                                                                                         |       |                            |       |                       |       |
| CURRENT  LIABILITIES:                                                                                                                                                        |       |                            |       |                       |       |
| Accounts payable                                                                                                                                                             |       | $                               | 6,172      |                       | $          | 8,056 |   |
| Accrued expenses  and other current liabilities                                                                                                                              |       | 13,895                          |       | 14,055                     |       |
| Income taxes  payable                                                                                                                                                        |       | 9,033                           |       | 7,180                      |       |
| Deferred  revenue, current portion                                                                                                                                           |       | 10,950                          |       | 7,321                      |       |
| Current portion  of acquisition liability                                                                                                                                    |       | 4,320                           |       | 343                        |       |
| Total current  liabilities                                                                                                                                                   |       | 44,370                          |       | 36,955                     |       |
|                                                                                                                                                                         |       |                            |       |                       |       |
| ACQUISITION  LIABILITY                                                                                                                                                       |       | —                          |       | 3,488                      |       |
| DEFERRED REVENUE                                                                                                                                                             |       | 13,881                          |       | 12,361                     |       |
| DEFERRED INCOME  TAX LIABILITIES                                                                                                                                             |       | 1,009                           |       | 1,275                      |       |
| OTHER LONG-TERM  LIABILITIES                                                                                                                                                 |       | 1,943                           |       | 1,951                      |       |
| Total  liabilities                                                                                                                                                           |       | 61,203                          |       | 56,030                     |       |
| COMMITMENTS AND  CONTINGENCIES (Note 11)                                                                                                                                     |       |                            |       |                       |       |
| SHAREHOLDERS’  EQUITY:                                                                                                                                                  |       |                            |       |                       |       |
| Common stock,  $0.10 par value; authorized 120,000,000 shares, issued and outstanding  70,031,223 and 69,086,652 shares at February 29, 2008 and May 31, 2007,  respectively |       | 7,003                           |       | 6,909                      |       |
| Additional  paid-in capital                                                                                                                                                  |       | 35,266                          |       | 29,076                     |       |
| Retained  earnings                                                                                                                                                           |       | 232,785                         |       | 179,768                    |       |
| Accumulated  other comprehensive income                                                                                                                                      |       | 11,781                          |       | 3,695                      |       |
| Total  shareholders’ equity                                                                                                                                             |       | 286,835                         |       | 219,448                    |       |
| Total  liabilities and shareholders’ equity                                                                                                                             |       | $                               | 348,038    |                       | $          | 275,478 |   |

 
| The accompanying notes are an integral part of these  Condensed Consolidated Financial Statements. |   |
|----------------------------------------------------------------------------------------------------|--------|

 

3

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**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATEDSTATEMENTS OF INCOME**

(Amounts inthousands, except per share data)

(Unaudited)

 
| ** **                        | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                        | ** ** | **February 29,**            | ** ** | **February 28,**           | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **                        | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                              |       |                             |       |                            |       |   |   |   |   |
| NET SALES                         |       | $                                | 67,029     |                            | $          | 57,091 |   | $ | 192,585 |   | $ | 162,557 |   |
| COST OF SALES                     |       | 18,688                           |       | 16,738                          |       | 56,489 |   | 49,825 |   |
| GROSS PROFIT                      |       | 48,341                           |       | 40,353                          |       | 136,096 |   | 112,732 |   |
|                              |       |                             |       |                            |       |   |   |   |   |
| OPERATING  EXPENSES:              |       |                             |       |                            |       |   |   |   |   |
| Research and  development         |       | 1,522                            |       | 1,624                           |       | 5,011 |   | 4,658 |   |
| Selling and  marketing            |       | 7,605                            |       | 6,850                           |       | 23,019 |   | 19,164 |   |
| Distribution                      |       | 2,881                            |       | 2,393                           |       | 8,212 |   | 7,061 |   |
| General and  administrative       |       | 7,228                            |       | 6,271                           |       | 19,385 |   | 16,784 |   |
| Restructuring  expense (gain)     |       | (77                              | )          | 72                              |       | 646 |   | 641 |   |
| Amortization  expense and other   |       | 88                               |       | 86                              |       | 261 |   | 259 |   |
| Total operating  expenses         |       | 19,247                           |       | 17,296                          |       | 56,534 |   | 48,567 |   |
|                              |       |                             |       |                            |       |   |   |   |   |
| INCOME FROM  OPERATIONS           |       | 29,094                           |       | 23,057                          |       | 79,562 |   | 64,165 |   |
|                              |       |                             |       |                            |       |   |   |   |   |
| NON-OPERATING  INCOME (EXPENSES): |       |                             |       |                            |       |   |   |   |   |
| Interest income                   |       | 1,260                            |       | 682                             |       | 3,504 |   | 1,845 |   |
| Interest expense                  |       | (111                             | )          | (106                            | )          | (292 | ) | (334 | ) |
| Other, net                        |       | (14                              | )          | 135                             |       | 73 |   | 231 |   |
| Total  non-operating income       |       | 1,135                            |       | 711                             |       | 3,285 |   | 1,742 |   |
|                              |       |                             |       |                            |       |   |   |   |   |
| INCOME BEFORE  INCOME TAXES       |       | 30,229                           |       | 23,768                          |       | 82,847 |   | 65,907 |   |
| PROVISION FOR  INCOME TAXES       |       | 10,963                           |       | 8,749                           |       | 29,667 |   | 24,050 |   |
| NET INCOME                        |       | $                                | 19,266     |                            | $          | 15,019 |   | $ | 53,180 |   | $ | 41,857 |   |
|                              |       |                             |       |                            |       |   |   |   |   |
| Earnings per  share:              |       |                             |       |                            |       |   |   |   |   |
| Per common share  - basic         |       | $                                | 0.28       |                            | $          | 0.22 |   | $ | 0.76 |   | $ | 0.61 |   |
| Per common share  - diluted       |       | $                                | 0.27       |                            | $          | 0.21 |   | $ | 0.75 |   | $ | 0.59 |   |

 
| The accompanying notes are an integral part of these Condensed  Consolidated Financial Statements. |
|----------------------------------------------------------------------------------------------------|

 

4

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**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’EQUITY AND COMPREHENSIVE INCOME**

(Unaudited,amounts in thousands)

 
| ** **                                        | ** ** | **Common Stock** | ** ** | **Additional  Paid-In** | ** ** | **Retained** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | **Total  Shareholders’** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|--------------|------------|---------------------------------------|------------|-------------------------------|------------|
| ** **                                        | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**  | ** ** | **Earnings**                          | ** ** | **Income***                   | ** ** | **Equity** | ** ** |
|                                              |       |                  |       |                    |       |         |       |                                  |       |                          |       |   |   |
| BALANCE, MAY 31,  2007, as previously reported    |       | 69,087                |       | $                       | 6,909      |         | $          | 29,076                                |       | $                             | 179,768    |   | $ | 3,695 |   | $ | 219,448 |   |
| Adjustment on  adoption of FIN 48 (see Note 7)    |       |                  |       |                    |       |         |       | (163                                  | )          |                          |       | (163 | ) |
| BALANCE, MAY 31,  2007, adjusted                  |       | 69,087                |       | 6,909                   |       | 29,076       |       | 179,605                               |       | 3,695                         |       | 219,285 |   |
| Shares issued  under employee stock plans         |       | 1,170                 |       | 117                     |       | 2,544        |       | —                                |       | —                        |       | 2,661 |   |
| Share-based  compensation expense                 |       | —                |       | —                  |       | 3,041        |       | —                                |       | —                        |       | 3,041 |   |
| Stock  repurchases and retirements                |       | (226                  | )          | (23                     | )          | (6,024       | )          | —                                |       | —                        |       | (6,047 | ) |
| Tax benefits  related to share-based compensation |       | —                |       | —                  |       | 6,629        |       | —                                |       | —                        |       | 6,629 |   |
| Comprehensive  income:                            |       |                  |       |                    |       |         |       |                                  |       |                          |       |   |   |
| Foreign currency  translation adjustments         |       | —                |       | —                  |       | —       |       | —                                |       | 8,086                         |       | 8,086 |   |
| Net income                                        |       | —                |       | —                  |       | —       |       | 53,180                                |       | —                        |       | 53,180 |   |
| Total  comprehensive income                       |       |                  |       |                    |       |         |       |                                  |       |                          |       | 61,266 |   |
|                                              |       |                  |       |                    |       |         |       |                                  |       |                          |       |   |   |
| BALANCE,  FEBRUARY 29, 2008                       |       | 70,031                |       | $                       | 7,003      |         | $          | 35,266                                |       | $                             | 232,785    |   | $ | 11,781 |   | $ | 286,835 |   |

 

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| *Accumulated Other Comprehensive Income balance  primarily consists of foreign currency translation adjustments and has no tax  effect. |
|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these  Condensed Consolidated Financial Statements.                                      |   |   |   |

 

5

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**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

(Unaudited,amounts in thousands)

 
| ** **                                                                         | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **February 29,**           | ** ** | **February 28,** | ** ** |
| ** **                                                                         | ** ** | **2008**                        | ** ** | **2007** | ** ** |
| OPERATING  ACTIVITIES:                                                             |       |                            |       |   |   |
| Net income                                                                         |       | $                               | 53,180     |   | $ | 41,857 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation and  amortization                                                     |       | 6,182                           |       | 4,986 |   |
| Accretion of  acquisition liabilities                                              |       | 138                             |       | 134 |   |
| Loss on  retirement of fixed assets                                                |       | 326                             |       | 113 |   |
| Provision for  doubtful accounts                                                   |       | 305                             |       | 148 |   |
| Share-based  compensation expense                                                  |       | 3,041                           |       | 2,464 |   |
| Deferred income  taxes                                                             |       | (3,038                          | )          | (1,920 | ) |
| Excess tax  benefit from share-based compensation                                  |       | (6,629                          | )          | (9,954 | ) |
| Changes in  operating assets and liabilities:                                      |       |                            |       |   |   |
| Accounts  receivable, trade                                                        |       | (3,892                          | )          | (8,242 | ) |
| Income taxes                                                                       |       | 6,210                           |       | 7,051 |   |
| Inventories                                                                        |       | (2,991                          | )          | (4,808 | ) |
| Other assets                                                                       |       | (256                            | )          | 1,199 |   |
| Accounts payable                                                                   |       | (2,181                          | )          | 1,516 |   |
| Deferred revenue                                                                   |       | 4,880                           |       | 2,501 |   |
| Accrued expenses  and other liabilities                                            |       | (1,181                          | )          | 1,975 |   |
| Cash provided by  operating activities                                             |       | 54,094                          |       | 39,020 |   |
|                                                                               |       |                            |       |   |   |
| INVESTING  ACTIVITIES:                                                             |       |                            |       |   |   |
| Purchases of  property and equipment                                               |       | (8,562                          | )          | (7,660 | ) |
| Proceeds from  short-term investments, net                                         |       | —                          |       | 1,641 |   |
| Cash used in investing activities                                                  |       | (8,562                          | )          | (6,019 | ) |
|                                                                               |       |                            |       |   |   |
| FINANCING  ACTIVITIES:                                                             |       |                            |       |   |   |
| Repayments of  long-term debt and liabilities                                      |       | (310                            | )          | (878 | ) |
| Repurchase of  common stock                                                        |       | (5,549                          | )          | (4,872 | ) |
| Proceeds from  exercise of stock options                                           |       | 2,180                           |       | 2,639 |   |
| Excess tax  benefit from share-based compensation                                  |       | 6,629                           |       | 9,954 |   |
| Cash provided by financing activities                                              |       | 2,950                           |       | 6,843 |   |
|                                                                               |       |                            |       |   |   |
| EFFECT OF  EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                             |       | 1,818                           |       | (224 | ) |
| INCREASE IN CASH  AND CASH EQUIVALENTS                                             |       | 50,300                          |       | 39,620 |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                  |       | 113,551                         |       | 54,103 |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                        |       | $                               | 163,851    |   | $ | 93,723 |   |
|                                                                               |       |                            |       |   |   |
| SUPPLEMENTAL  INFORMATION:                                                         |       |                            |       |   |   |
| Tax paid                                                                           |       | $                               | 26,482     |   | $ | 18,240 |   |
| Interest paid                                                                      |       | 117                             |       | 173 |   |
| NON-CASH  INVESTING AND FINANCING ACTIVITIES:                                      |       |                            |       |   |   |
| Shares  surrendered for amounts due on stock options exercised                     |       | $                               | 498        |   | $ | — |   |

 
| The accompanying notes are an integral part of these Condensed  Consolidated Financial Statements. |
|----------------------------------------------------------------------------------------------------|

 

6

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** **

**IMMUCOR,INC. AND SUBSIDIARIES**

**Notes to Condensed Consolidated FinancialStatements**

(Unaudited)

 

# **1.****             ****NATURE OFBUSINESS AND BASIS OF PRESENTATION**

#  

***Natureof Business***

 

Immucor, Inc. (“Immucor”and, together with its wholly owned subsidiaries, the “Company”) is in thebusiness of developing, manufacturing and marketing immunological diagnosticmedical products. The Company operates facilities in the United States, Canada,Europe and Japan.  The unauditedcondensed consolidated financial statements include the accounts of the Companyand all of its subsidiaries.

 

***Basisof Presentation***

The accompanyingcondensed consolidated financial statements are unaudited and have beenprepared in accordance with U.S. generally accepted accounting principles (“U.S.GAAP”) for interim financial information, and the Securities and ExchangeCommission’s (“SEC”) instructions for Form 10-Q and Article 10 ofRegulation S-X.  Accordingly, they do notinclude all of the information and footnotes required by U.S. GAAP for completefinancial statements. In the opinion of management, all adjustments, consistingof normal recurring adjustments, unless otherwise disclosed in a separate note,considered necessary for a fair presentation of the unaudited condensedconsolidated financial statements have been recorded in the interim periodspresented.  These unaudited, condensedconsolidated financial statements should be read in conjunction with theCompany’s audited, consolidated financial statements and related notes for theyear ended May 31, 2007, included in the Company’s Annual Report on Form 10-K.

 

The accompanyingcondensed consolidated financial statements present results of operations forthe three and nine months ended February 29, 2008. These results are notnecessarily indicative of the results that may be achieved for the year ending May 31,2008, or any other period.

 

***Basisof Consolidation***

The condensedconsolidated financial statements include the accounts of Immucor and all itssubsidiaries. All significant inter-company balances and transactions have beeneliminated in consolidation.

 

# **2.****             ****INVENTORIES**

#  

Inventories are stated atthe lower of cost (first-in, first-out basis) or market (net realizable value):

 
| ** **                  | ** ** | **February 29, 2008** | ** ** | **May 31, 2007** | ** ** |
|-----------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                  | ** ** | **(in thousands)**              | ** ** |
|                        |       |                            |       |                       |       |
| Raw materials  and supplies |       | $                               | 7,914      |                       | $          | 6,364 |   |
| Work in process             |       | 3,558                           |       | 4,829                      |       |
| Finished goods              |       | 22,176                          |       | 18,127                     |       |
|                        |       | $                               | 33,648     |                       | $          | 29,320 |   |

 

# **3.****             ****SHAREHOLDERS’EQUITY**

#  

During the first quarterof fiscal 2008, the Company either withheld from certain option exercises orreacquired from certain restricted stock holders an aggregate of 206,787 sharesvalued at $5.5 million in compliance with the statutory tax withholdingrequirements.  The Company retired theseshares and disclosed their value as ‘Stock repurchases and retirements’ in thecondensed consolidated statement of shareholders’ equity and comprehensiveincome and as ‘Repurchase of common stock’ under financing activities in thecondensed consolidated statements of cash flows.

 

7

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During the first quarterof fiscal 2008, the Company also withheld 18,609 shares valued at $0.5 millionfrom an employee who exercised options and elected to pay the option exerciseprice by having shares withheld. These shares were also retired and theirvalues were disclosed as ‘Stock repurchases and retirements’ in the condensedconsolidated statement of shareholders’ equity and comprehensive income and as ‘Non-cashinvesting and financing activities’ in the condensed consolidated statements ofcash flows.

 

No shares were withheldor acquired in the second quarter of fiscal 2008. In the third quarter offiscal 2008, 288 shares were withheld and retired in compliance with thestatutory tax withholding requirements. The shares acquired were returned tothe status of authorized, but unissued shares.

 

# **4.****             ****STOCKREPURCHASE PROGRAM**

#  

The Company instituted a stock repurchase program in June 1998 andthrough December 13, 2005, the Board of Directors had authorized theCompany to repurchase up to 9,375,000 shares of the Company’s common stock.

 

During the nine monthsended February 29, 2008, the Company did not make any repurchases in theopen market under the 1998 repurchase program. During the nine months ended February 28, 2007, 281,969 shares wererepurchased for $4.9 million.  As of February 29,2008, 8,232,944 shares had been repurchased under the program, leaving1,142,056 shares available for repurchase.

 

The shares repurchased in fiscal 2007 were returned to the status ofauthorized, but unissued shares.

 

# **5.****             ****SHARE-BASEDCOMPENSATION**

#  

*Plansummary*

 

During the first ninemonths of fiscal 2008 the Immucor, Inc. 2005 Long-Term Incentive Plan (the“2005 Plan”) was the only plan under which the Company was authorized to grantstock incentive awards. Under the 2005 Plan, management is able to award stockoptions, stock appreciation rights, restricted stock, deferred stock, and otherperformance-based awards as incentive and compensation to employees. Themaximum number of shares of the Company’s common stock as to which awards maybe granted under the 2005 Plan is 3,600,000. The maximum number of shares that may be used for awards other thanstock options is 1,800,000, and the maximum number of shares that may be usedfor grants of incentive stock options is 1,800,000.  Options are granted at the closing marketprice on the date of the grant.  Optionawards generally vest equally over a four-year period and have a six-yearcontractual term. Restricted stock awards generally vest equally over a five-yearperiod.  The 2005 Plan provides foraccelerated vesting of option and restricted stock awards if there is a changein control, as defined in the 2005 Plan.

 

*Valuationmethod used and assumptions*

 

The fair value of eachoption grant in the three months and nine months ended February 29, 2008and February 28, 2007 was estimated on the date of grant using theBlack-Scholes option-pricing model with the following weighted-averageassumptions:

 
| ** **                   | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                   | ** ** | **February 29,**            | ** ** | **February 28,**           | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **                   | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Risk-free  interest rate (1) |       | 3.16%                            |       | 4.53%                           |       | 4.92% |   | 4.92% |   |
| Expected  volatility (2)     |       | 40.36%                           |       | 44.14%                          |       | 40.26% |   | 47.51% |   |
| Expected life  (years) (3)   |       | 4.25                             |       | 4.25                            |       | 4.25 |   | 4.25 |   |
| Expected  dividend yield (4) |       | —                           |       | —                          |       | — |   | — |   |

 

----

(1)                                  Based on the U.S. Treasury yield curve ineffect at the time of grant.

(2)                                  Expected stock price volatility is basedon the average historical volatility of the Company’s shares during the periodcorresponding to the expected life of the options.

(3)                                  Represents the period of time options areexpected to remain outstanding. As theCompany has so far only awarded“plain vanilla options” as described by the SEC’s Staff Accounting Bulletin No. 107 (SAB 107), theCompany used the “simplified method” for determining the expected life of the options granted. Originally, under SAB 107, this method was alloweduntil December31, 2007. However, on December 21, 2007, the SEC issued SEC’s Staff Accounting Bulletin No.110 (SAB 110), which will allowa Company to continue to use the “simplified method” under certaincircumstances, which the Company will continue to use as the Company does not have sufficient, historical data toestimate the expected term of share based award.

 

8

----

 

(4)                                  The Company has not paid dividends on itscommon stock and does not expect to pay dividends on its common stock in thenear future.

 

*Impact ofadoption of SFAS 123R*

 

On adoption of Statementof Financial Accounting Standard (“SFAS”) No. 123R, “*Share-BasedPayment”* (“SFAS 123R”) as of June 1, 2006, the unrecognizedcompensation expense associated with the remaining portion of the unvestedoutstanding awards was $4.5 million ($2.9 million, net of taxes) which is beingrecognized on a straight-line basis over the weighted-average vesting period ofapproximately 1.75 years.

 

Total share-basedcompensation expense included in the condensed consolidated statements ofincome for the three-month periods ended February 29, 2008 and February 28,2007 was $1.0 million ($0.7 million, net of taxes), and $0.8 million ($0.6million, net of taxes), respectively. Total share-based compensation expense included in the condensedconsolidated statements of income for the nine-month periods ended February 29,2008 and February 28, 2007 was $3.0 million ($2.2 million, net of taxes),and $2.5 million ($1.7 million, net of taxes), respectively.

 

The impact of theadoption of SFAS 123R on basic and diluted earnings per share was a reductionby $0.01 per share for each of the three-month periods ended February 29,2008 and February 28, 2007.   Theimpact on basic and diluted earnings per share was a reduction by $0.03 pershare for the nine-month period ended February 29, 2008.  For the nine-month period ended February 28,2007, the impact on basic and diluted earnings per share was a reduction by$0.03 per share and $0.02 per share, respectively.

 

*Stockoption activity*

 

The optionsgranted under the 2005 Plan during the nine months ended February 29, 2008have a six-year term with vesting of 25% at each anniversary of the issuancedate; the restricted shares vest 20% at each anniversary of the issuancedate.  The Company has not granted anyoption or share awards with market or performance conditions. Compensationcosts for stock options with tiered vesting terms are recognized evenly overthe vesting periods.

 

The following is asummary of the changes in outstanding options for the nine months ended February 29,2008:

 

9

----

 
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | **Weighted**          | ** ** | ** **               | ** ** |
|----------------------------------------------------------|------------|--------------------|------------|-------------------------|------------|-----------------------|------------|--------------------------|------------|
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | **Average**           | ** ** | ** **               | ** ** |
| ** **                                               | ** ** | ** **         | ** ** | **Weighted**            | ** ** | **Remaining**         | ** ** | **Aggregate**            | ** ** |
| ** **                                               | ** ** | **Number of** | ** ** | **Average**             | ** ** | **Contractual**       | ** ** | **Intrinsic Value** | ** ** |
| ** **                                               | ** ** | **Shares**         | ** ** | **Exercise Price** | ** ** | **Life (years)** | ** ** | **(1)**                  | ** ** |
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | ** **            | ** ** | **(in thousands)**       | ** ** |
| Outstanding at  May 31, 2007                             |       | 3,570,914          |       | $                       | 5.63       |                  |       |                     |       |   |
| Granted                                                  |       | 424,736            |       | $                       | 29.23      |                  |       |                     |       |   |
| Exercised                                                |       | (1,038,489         | )          | $                       | 1.85       |                  |       |                     |       |   |
| Forfeited                                                |       | (9,141             | )          | $                       | 20.44      |                  |       |                     |       |   |
| Expired                                                  |       | (223,605           | )          | $                       | 1.21       |                  |       |                     |       |   |
| Outstanding at  August 31, 2007                          |       | 2,724,415          |       | $                       | 11.07      |                  | 5.5        |                     | $          | 60,712 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Granted                                                  |       | 4,998              |       | $                       | 31.72      |                  |       |                     |       |   |
| Exercised                                                |       | (43,863            | )          | $                       | 7.53       |                  |       |                     |       |   |
| Forfeited                                                |       | (8,910             | )          | $                       | 29.23      |                  |       |                     |       |   |
| Expired                                                  |       | (83,725            | )          | $                       | 1.05       |                  |       |                     |       |   |
| Outstanding at  November 30, 2007                        |       | 2,592,915          |       | $                       | 11.43      |                  | 5.4        |                     | $          | 51,351 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Granted                                                  |       | 30,287             |       | $                       | 31.40      |                  |       |                     |       |   |
| Exercised                                                |       | (60,865            | )          | $                       | 6.82       |                  |       |                     |       |   |
| Forfeited                                                |       | —             |       | $                       | —     |                  |       |                     |       |   |
| Expired                                                  |       | (10                | )          | $                       | 20.03      |                  |       |                     |       |   |
| Outstanding at  February 29, 2008                        |       | 2,562,327          |       | $                       | 11.77      |                  | 5.2        |                     | $          | 46,323 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Exercisable at  February 29, 2008                        |       | 1,661,333          |       | $                       | 6.51       |                  | 5.0        |                     | $          | 38,700 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Shares available  for future grants at February 29, 2008 |       | 1,053,850          |       |                    |       |                  |       |                     |       |

 

----

| 1) | The aggregate intrinsic  value in the above table represents the total pre-tax intrinsic value (the  difference between the Company’s closing stock price on the last trading day  of the quarter and the exercise price, multiplied by the number of options).                                                                      |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2) | The weighted-average  grant-date fair value of share options granted during the first nine months  of fiscal years 2008 and 2007 was $11.59 and $8.18, respectively. The total  intrinsic value of share options exercised during the first nine months of  fiscal years 2008 and 2007 was $31.0 million and $29.3 million, respectively. |

 

*Restrictedstock activity*

 

The Companyawarded restricted shares for the first time on June 6, 2006. Thefollowing is a summary of the changes in nonvested restricted stock for thenine months ended February 29, 2008:

 

10

----

 
| ** **                                               | ** ** | ** **                     | ** ** | **Weighted-Average**     | ** ** |
|----------------------------------------------------------|------------|--------------------------------|------------|--------------------------|------------|
| ** **                                               | ** ** | ** **                     | ** ** | **Grant-Date Fair** | ** ** |
| ** **                                               | ** ** | **Number of Shares** | ** ** | **Value**                | ** ** |
| Nonvested stock  outstanding at May 31, 2007             |       | 112,590                        |       | $                        | 17.51      |   |
| Granted                                                  |       | 48,055                         |       | 29.23                    |       |
| Vested                                                   |       | (22,518                        | )          | 17.51                    |       |
| Forfeited                                                |       | (1,360                         | )          | —                   |       |
| Nonvested stock  outstanding at August 31, 2007          |       | 136,767                        |       | $                        | 21.63      |   |
|                                                     |       |                           |       |                     |       |
| Granted                                                  |       | —                         |       | —                   |       |
| Vested                                                   |       | (3,648                         | )          | 23.49                    |       |
| Forfeited                                                |       | (184                           | )          | 17.51                    |       |
| Expired                                                  |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at November 30, 2007        |       | 132,935                        |       | $                        | 21.58      |   |
|                                                     |       |                           |       |                     |       |
| Granted                                                  |       | —                         |       | —                   |       |
| Vested                                                   |       | (872                           | )          | 17.51                    |       |
| Forfeited                                                |       | —                         |       | —                   |       |
| Expired                                                  |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at February 29, 2008        |       | 132,063                        |       | $                        | 21.61      |   |
|                                                     |       |                           |       |                     |       |
| Shares available  for future grants at February 29, 2008 |       | 1,630,984                      |       |                     |       |

 

The total fair value ofshares vested during the nine-month periods ended February 28, 2007 and February 29,2008 was $0.3 million and $0.8 million, respectively.

 

As of February 29,2008, there was $8.0 million of total unrecognized compensation cost related tononvested share-based compensation arrangements. This compensation cost isexpected to be recognized through June 8, 2012, based on existing vestingterms with the weighted average remaining expense recognition period beingapproximately 3.14 years.

 

# **6.****             ****COMPREHENSIVEINCOME**

#  

The components ofcomprehensive income for the three-month and nine-month periods ended February 29,2008 and February 28, 2007 are as follows (in thousands):

 
| ** **                                    | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **February 29,**            | ** ** | **February 28,**           | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **                                    | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                          |       |                             |       |                            |       |   |   |   |   |
| Net income                                    |       | $                                | 19,266     |                            | $          | 15,019 |   | $ | 53,180 |   | $ | 41,857 |   |
| Net foreign  currency translation adjustments |       | 2,684                            |       | (665                            | )          | 8,086 |   | (592 | ) |
| Comprehensive  income                         |       | $                                | 21,950     |                            | $          | 14,354 |   | $ | 61,266 |   | $ | 41,265 |   |

 

No tax effect isrecorded for foreign currency translation adjustments as the foreign net assetstranslated are deemed permanently invested.

 

# **7.****             ****INCOMETAXES**

#  

The Company adopted theprovisions of Financial Interpretation No. 48, “*Accountingfor Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109*”(“FIN 48”) on June 1, 2007. The cumulative effect of implementation of FIN48 was a $0.2 million increase in the liability for unrecognized tax benefits,which was accounted for as a decrease in the May 31, 2007 balance ofretained earnings. As of the adoption date, the 

 

11

----

 

Company had grossunrecognized tax benefits of $5.1 million, which was accounted for as follows(in thousands):

 
| Reduction in  Retained Earnings (cumulative effect) |   | $     | 163    |   |
|-----------------------------------------------------|--------|-------|--------|--------|
| Addition to  Deferred Tax Assets                    |   | 1,745 |   |
| Reduction in FAS  5 Reserve                         |   | 3,222 |   |
| Increase in  Liability                              |   | $     | 5,130  |   |

 

The total balance ofunrecognized tax benefits that would affect the effective tax rate, ifrecognized, is $3.4 million. The Company does not currently anticipate that thetotal amount of unrecognized tax benefits will significantly increase ordecrease during the twelve months ending February 28, 2009.

 

The Company recognizesinterest and penalties related to unrecognized tax benefits in income taxexpense. Upon adoption of FIN 48 on June 1, 2007, the Company recognized$1.0 million of gross interest expense. The Company has not recognized any penalties upon adoption of FIN 48.The amount of the unrecognized tax benefits did not change significantly duringthe three or nine months ended February 29, 2008.

 

The Company is subject totaxation in the U.S. and various states and foreign jurisdictions. The Company’stax years for the fiscal years ended May 31, 2005, May 31, 2006 and May 31,2007 are subject to examination by the tax authorities.

 

With few exceptions, theCompany is no longer subject to U.S. federal, state, local or foreignexaminations by tax authorities for years before the fiscal year ended May 31,2005.

 

# **8.****             ****EARNINGSPER SHARE**

#  

The following table sets forth the computation of basic and dilutedearnings per share in accordance with SFAS No. 128, “*Earnings perShare”*.

 

Basic earnings per common share are calculated by dividing net incomeby weighted-average common shares outstanding during the period.  Diluted earnings per common share arecalculated by dividing net income by weighted-average common shares outstandingduring the period plus dilutive potential common shares, which are determinedas follows (in thousands, except per share data):

 
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **February 29,**            | ** ** | **February 28,**           | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **                                                                         | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                                               |       |                             |       |                            |       |   |   |   |   |
| Numerator for  basic and diluted earnings per share:                               |       |                             |       |                            |       |   |   |   |   |
| Net Income                                                                         |       | $                                | 19,266     |                            | $          | 15,019 |   | $ | 53,180 |   | $ | 41,857 |   |
|                                                                               |       |                             |       |                            |       |   |   |   |   |
| Denominator:                                                                       |       |                             |       |                            |       |   |   |   |   |
| For basic  earnings per share - weighted average shares basis                      |       | 69,991                           |       | 68,838                          |       | 69,792 |   | 68,257 |   |
| Effect of  dilutive stock options and restricted stock                             |       | 1,122                            |       | 2,134                           |       | 1,308 |   | 2,350 |   |
| Denominator for  diluted earnings per share-adjusted weighted average shares basis |       | 71,113                           |       | 70,972                          |       | 71,100 |   | 70,607 |   |
|                                                                               |       |                             |       |                            |       |   |   |   |   |
| Earnings per  common share – basic                                            |       | $                                | 0.28       |                            | $          | 0.22 |   | $ | 0.76 |   | $ | 0.61 |   |
| Earnings per  common share – diluted                                          |       | $                                | 0.27       |                            | $          | 0.21 |   | $ | 0.75 |   | $ | 0.59 |   |

 

The effect of 44,515 and5,911 out-of-the-money options for the quarter ended February 29, 2008 andFebruary 28, 2007, respectively, and 40,137 and 14,743 out-of-the-moneyoptions for the nine months ended February 29, 2008 and February 28,2007, respectively, were excluded from the above calculation as inclusion ofthese securities would be anti-dilutive.

 

12

----

#  

# **9.****             ****SUBSEQUENTEVENT**

#  

On March 11, 2008, the Company signed adefinitive agreement to acquire BioArray Solutions Ltd. (“BioArray”), aprivately held company based in Warren, NJ for approximately $117 million incash. BioArray has pioneered the development of molecular diagnostic systemswhich enable the DNA typing (genotyping) of blood for transfusion donors and recipients.Closing of this acquisition is conditioned upon, among other matters, receiptof regulatory approvals including pre-merger notification clearance under theHart-Scott-Rodino Antitrust Improvements Act.

 

BioArray has formed a new company intended tocommercialize BioArray technologies in fields outside of blood transfusion andtransplantation.  If the acquisitioncloses, the current equity holders of BioArray will hold 81% ownership interestin the new company, and Immucor, through BioArray and for no additionalconsideration, will hold a 19% ownership interest.

 

The Company believes that the acquisition will enablethe Company to provide innovative molecular diagnostic solutions for the bloodtransfusion market that complement its current product line, and that theCompany’s leadership in blood banking industry automation and BioArray’sleadership in molecular diagnostic systems for specialty transfusionapplications will allow Immucor to develop and deliver more precise genotypingsolutions to enhance patient outcomes. The Company also believes that thisacquisition will open up broader opportunities for the Company intransplantation and transfusion-related applications.

 

The Company expects this acquisition to be materiallydilutive to earnings per share for several years following closing as keyinvestments are made in research, development, and the automation and marketingof the BioArray product line.

 

# **10.****      ****SEGMENTAND GEOGRAPHIC INFORMATION**

#  

The Company’s operations and segments are organized aroundgeographic areas.  Immucor’s “Other”segment includes the operations of Belgium, Portugal, Spain and France. Theforeign locations principally function as distributors of products developedand manufactured by the Company in the United States and Canada. The accountingpolicies applied in the preparation of the Company’s consolidated financialstatements are applied consistently across all segments.  Intersegment sales are recorded at marketprice and are eliminated in consolidation.

 

Segment information for the three-month and nine-monthperiods ended February 29, 2008 and February 28, 2007 is summarizedbelow (in thousands).

 

13

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| ** **                      | ** ** | **For the Three Months Ended February 29, 2008** | ** ** |
|---------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S.**                                                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Traditional  reagent revenues:  |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | $                                                                                   | 35,207     |   | $ | 2,204 |   | $ | 2,529 |   | $ | 2,467 |   | $ | 1,877 |   | $ | 1,429 |   | $ | — |   | $ | 45,713 |   |
| Affiliates                      |       | 1,270                                                                               |       | 887 |   | — |   | 46 |   | — |   | 3 |   | (2,206 | ) | — |   |
| Total                           |       | 36,477                                                                              |       | 3,091 |   | 2,529 |   | 2,513 |   | 1,877 |   | 1,432 |   | (2,206 | ) | 45,713 |   |
| Capture revenues:               |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | 9,128                                                                               |       | 1,044 |   | 1,520 |   | 858 |   | 109 |   | 1,508 |   | — |   | 14,167 |   |
| Affiliates                      |       | 1,882                                                                               |       | 612 |   | — |   | — |   | — |   | — |   | (2,494 | ) | — |   |
| Total                           |       | 11,010                                                                              |       | 1,656 |   | 1,520 |   | 858 |   | 109 |   | 1,508 |   | (2,494 | ) | 14,167 |   |
| Net instrument  revenues:       |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | 4,466                                                                               |       | 1,204 |   | 689 |   | 425 |   | 10 |   | 355 |   | — |   | 7,149 |   |
| Affiliates                      |       | 1,117                                                                               |       | 932 |   | — |   | — |   | — |   | — |   | (2,049 | ) | — |   |
| Total                           |       | 5,583                                                                               |       | 2,136 |   | 689 |   | 425 |   | 10 |   | 355 |   | (2,049 | ) | 7,149 |   |
| Net collagen  revenues:         |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Affiliates                      |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                           |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
|                            |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                       |       | 53,070                                                                              |       | 6,883 |   | 4,738 |   | 3,796 |   | 1,996 |   | 3,295 |   | (6,749 | ) | 67,029 |   |
|                            |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations  |       | 25,826                                                                              |       | 65 |   | 1,409 |   | 1,894 |   | (42 | ) | (131 | ) | 73 |   | 29,094 |   |
|                            |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                    |       | 1,047                                                                               |       | 195 |   | 412 |   | 48 |   | 55 |   | 275 |   | — |   | 2,032 |   |
| Amortization                    |       | 70                                                                                  |       | — |   | — |   | — |   | 17 |   | — |   | — |   | 87 |   |
| Restructuring  expenses (gains) |       | (77                                                                                 | )          |   |   |   |   |   |   |   |   |   |   |   |   | (77 | ) |
| Income tax  expense             |       | 9,557                                                                               |       | 71 |   | 600 |   | 687 |   | — |   | 21 |   | 27 |   | 10,963 |   |
| Capital  expenditures           |       | 1,175                                                                               |       | 533 |   | 558 |   | 33 |   | — |   | 552 |   | — |   | 2,851 |   |
|                                 |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                     | ** ** | **For the Three Months Ended February 28, 2007** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Traditional  reagent revenues: |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | $                                                                                   | 32,720     |   | $ | 1,945 |   | $ | 2,000 |   | $ | 2,040 |   | $ | 1,747 |   | $ | 938 |   | $ | — |   | $ | 41,390 |   |
| Affiliates                     |       | 1,345                                                                               |       | 714 |   | — |   | 68 |   | — |   | 2 |   | (2,129 | ) | — |   |
| Total                          |       | 34,065                                                                              |       | 2,659 |   | 2,000 |   | 2,108 |   | 1,747 |   | 940 |   | (2,129 | ) | 41,390 |   |
| Capture revenues:              |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 6,198                                                                               |       | 876 |   | 1,333 |   | 433 |   | 115 |   | 1,292 |   | — |   | 10,247 |   |
| Affiliates                     |       | 1,276                                                                               |       | 428 |   | — |   | — |   | — |   | — |   | (1,704 | ) | — |   |
| Total                          |       | 7,474                                                                               |       | 1,304 |   | 1,333 |   | 433 |   | 115 |   | 1,292 |   | (1,704 | ) | 10,247 |   |
| Net instrument  revenues:      |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 2,654                                                                               |       | 795 |   | 307 |   | 139 |   | 5 |   | 507 |   | — |   | 4,407 |   |
| Affiliates                     |       | 1,329                                                                               |       | 1,555 |   | — |   | — |   | — |   | — |   | (2,884 | ) | — |   |
| Total                          |       | 3,983                                                                               |       | 2,350 |   | 307 |   | 139 |   | 5 |   | 507 |   | (2,884 | ) | 4,407 |   |
| Net collagen  revenues:        |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 1,047                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,047 |   |
| Affiliates                     |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                          |       | 1,047                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,047 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                      |       | 46,569                                                                              |       | 6,313 |   | 3,640 |   | 2,680 |   | 1,867 |   | 2,739 |   | (6,717 | ) | 57,091 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations |       | 21,866                                                                              |       | 185 |   | 222 |   | 1,055 |   | (135 | ) | 31 |   | (167 | ) | 23,057 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                   |       | 875                                                                                 |       | 170 |   | 345 |   | 47 |   | 40 |   | 210 |   | — |   | 1,687 |   |
| Amortization                   |       | 70                                                                                  |       | — |   | — |   | — |   | 16 |   | 2 |   | — |   | 88 |   |
| Restructuring  expenses        |       | 72                                                                                  |       | — |   | — |   | — |   | — |   | — |   | — |   | 72 |   |
| Income tax  (benefit) expense  |       | 8,094                                                                               |       | 96 |   | 208 |   | 426 |   | — |   | (13 | ) | (62 | ) | 8,749 |   |
| Capital  expenditures          |       | 2,412                                                                               |       | 38 |   | 290 |   | 6 |   | 15 |   | 170 |   | — |   | 2,931 |   |
|                                |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

14

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| ** **                           | ** ** | **For the Nine Months Ended February 29, 2008** | ** ** |
|--------------------------------------|------------|------------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **U.S.**                                                                           | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Traditional  reagent revenues:       |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers              |       | $                                                                                  | 103,217    |   | $ | 6,352 |   | $ | 6,865 |   | $ | 7,317 |   | $ | 5,539 |   | $ | 4,524 |   | $ | — |   | $ | 133,814 |   |
| Affiliates                           |       | 4,229                                                                              |       | 2,808 |   | — |   | 165 |   | — |   | 9 |   | (7,211 | ) | — |   |
| Total                                |       | 107,446                                                                            |       | 9,160 |   | 6,865 |   | 7,482 |   | 5,539 |   | 4,533 |   | (7,211 | ) | 133,814 |   |
| Capture revenues:                    |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers              |       | 24,206                                                                             |       | 2,978 |   | 4,419 |   | 2,206 |   | 339 |   | 4,197 |   | — |   | 38,345 |   |
| Affiliates                           |       | 5,059                                                                              |       | 1,752 |   | — |   | — |   | — |   | — |   | (6,811 | ) | — |   |
| Total                                |       | 29,265                                                                             |       | 4,730 |   | 4,419 |   | 2,206 |   | 339 |   | 4,197 |   | (6,811 | ) | 38,345 |   |
| Net instrument  revenues:            |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers              |       | 10,600                                                                             |       | 3,576 |   | 1,982 |   | 1,394 |   | 167 |   | 1,010 |   | — |   | 18,729 |   |
| Affiliates                           |       | 1,991                                                                              |       | 2,656 |   | — |   | — |   | — |   | — |   | (4,647 | ) | — |   |
| Total                                |       | 12,591                                                                             |       | 6,232 |   | 1,982 |   | 1,394 |   | 167 |   | 1,010 |   | (4,647 | ) | 18,729 |   |
| Net collagen  revenues:              |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers              |       | 1,697                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,697 |   |
| Affiliates                           |       | —                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                                |       | 1,697                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,697 |   |
|                                 |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                            |       | 150,999                                                                            |       | 20,122 |   | 13,266 |   | 11,082 |   | 6,045 |   | 9,740 |   | (18,669 | ) | 192,585 |   |
|                                 |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations       |       | 71,911                                                                             |       | 94 |   | 3,048 |   | 4,573 |   | (240 | ) | 239 |   | (63 | ) | 79,562 |   |
|                                 |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                         |       | 3,151                                                                              |       | 555 |   | 1,131 |   | 160 |   | 155 |   | 770 |   | — |   | 5,922 |   |
| Amortization                         |       | 211                                                                                |       | — |   | — |   | — |   | 49 |   |   |   | — |   | 260 |   |
| Restructuring  expenses              |       | 646                                                                                |       | — |   | — |   | — |   | — |   | — |   | — |   | 646 |   |
| Income tax  (benefit) expense        |       | 26,743                                                                             |       | (196 | ) | 1,550 |   | 1,537 |   | — |   | 56 |   | (23 | ) | 29,667 |   |
| Capital  expenditures                |       | 5,249                                                                              |       | 695 |   | 1,358 |   | 119 |   | 88 |   | 1,053 |   | — |   | 8,562 |   |
| Property &  equipment - net |       | 23,655                                                                             |       | 2,670 |   | 3,365 |   | 1,366 |   | 602 |   | 3,026 |   | — |   | 34,684 |   |
| Total assets at  period end          |       | 300,080                                                                            |       | 20,310 |   | 28,421 |   | 22,224 |   | 16,622 |   | 14,133 |   | (53,752 | ) | 348,038 |   |
|                                      |            |                                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                          | ** ** | **For the Nine Months Ended February 28, 2007** | ** ** |
|-------------------------------------|------------|------------------------------------------------------------------------------------|------------|
| ** **                          | ** ** | **U.S.**                                                                           | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Traditional  reagent revenues:      |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers             |       | $                                                                                  | 89,421     |   | $ | 5,634 |   | $ | 6,016 |   | $ | 6,424 |   | $ | 5,488 |   | $ | 2,956 |   | $ | — |   | $ | 115,939 |   |
| Affiliates                          |       | 4,266                                                                              |       | 1,623 |   | — |   | 184 |   | — |   | 134 |   | (6,207 | ) | — |   |
| Total                               |       | 93,687                                                                             |       | 7,257 |   | 6,016 |   | 6,608 |   | 5,488 |   | 3,090 |   | (6,207 | ) | 115,939 |   |
| Capture revenues:                   |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers             |       | 18,399                                                                             |       | 2,551 |   | 4,181 |   | 1,354 |   | 447 |   | 3,857 |   | — |   | 30,789 |   |
| Affiliates                          |       | 4,052                                                                              |       | 706 |   | — |   | — |   | — |   | — |   | (4,758 | ) | — |   |
| Total                               |       | 22,451                                                                             |       | 3,257 |   | 4,181 |   | 1,354 |   | 447 |   | 3,857 |   | (4,758 | ) | 30,789 |   |
| Net instrument  revenues:           |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers             |       | 7,481                                                                              |       | 2,357 |   | 891 |   | 393 |   | 10 |   | 1,425 |   | — |   | 12,557 |   |
| Affiliates                          |       | 1,767                                                                              |       | 3,431 |   | — |   | — |   | — |   | — |   | (5,198 | ) | — |   |
| Total                               |       | 9,248                                                                              |       | 5,788 |   | 891 |   | 393 |   | 10 |   | 1,425 |   | (5,198 | ) | 12,557 |   |
| Net collagen  revenues:             |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers             |       | 3,272                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 3,272 |   |
| Affiliates                          |       | —                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                               |       | 3,272                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 3,272 |   |
|                                |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                           |       | 128,658                                                                            |       | 16,302 |   | 11,088 |   | 8,355 |   | 5,945 |   | 8,372 |   | (16,163 | ) | 162,557 |   |
|                                |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations      |       | 58,795                                                                             |       | (153 | ) | 1,755 |   | 3,666 |   | (83 | ) | 669 |   | (484 | ) | 64,165 |   |
|                                |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                        |       | 2,358                                                                              |       | 497 |   | 1,012 |   | 142 |   | 118 |   | 594 |   | — |   | 4,721 |   |
| Amortization                        |       | 211                                                                                |       | — |   | — |   | — |   | 48 |   | 6 |   | — |   | 265 |   |
| Restructuring  expenses             |       | 641                                                                                |       | — |   | — |   | — |   | — |   | — |   | — |   | 641 |   |
| Income tax  expense                 |       | 21,705                                                                             |       | 1 |   | 1,046 |   | 1,456 |   | — |   | 21 |   | (179 | ) | 24,050 |   |
| Capital  expenditures               |       | 6,045                                                                              |       | 312 |   | 694 |   | 41 |   | 35 |   | 533 |   | — |   | 7,660 |   |
| Property &  equipment, net |       | 19,737                                                                             |       | 2,306 |   | 2,840 |   | 1,168 |   | 491 |   | 2,061 |   | — |   | 28,603 |   |
| Total assets at  period end         |       | 217,055                                                                            |       | 14,054 |   | 21,842 |   | 15,923 |   | 12,857 |   | 10,571 |   | (46,724 | ) | 245,578 |   |
|                                     |            |                                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The Company discontinued manufacturing collagenproducts in the second quarter of fiscal 2008.

 

Net export sales to unaffiliated customers (inthousands):

 

15

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| ** **              | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **              | ** ** | **February 29,**            | ** ** | **February 28,**           | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **              | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                    |       |                             |       |                            |       |   |   |   |   |
| United States           |       | $                                | 1,700      |                            | $          | 1,255 |   | $ | 4,645 |   | $ | 3,890 |   |
| Germany                 |       | 1,848                            |       | 1,205                           |       | 5,208 |   | 3,443 |   |
| Canada                  |       | 395                              |       | 353                             |       | 1,451 |   | 1,226 |   |
| Total net export  sales |       | $                                | 3,943      |                            | $          | 2,813 |   | $ | 11,304 |   | $ | 8,559 |   |

 

# **11.****      ****COMMITMENTSAND CONTINGENCIES**

#  

*FTC Investigation*

On October 12, 2007, the Company received aletter from the Federal Trade Commission (“FTC”) requesting that the Companyvoluntarily provide certain documents and information to the FTC concerningthree acquisitions made by the Company in the period from 1996 through 1999,and concerning the Company’s product pricing activities since then.  The letter states the request is part of anon-public investigation by the FTC of whether the Company violated federalantitrust laws or engaged in unfair methods of competition through thoseacquisitions, and whether the Company or others engaged in unfair methods ofcompetition by restricting price competition. The FTC letter states that neither the letter nor the existence of theinvestigation indicates that the FTC has concluded that the Company or anyoneelse has violated the law.  The Companyintends to cooperate with the FTC in this investigation, and is in the processof responding to the FTC’s request.  Atthis time the Company cannot reasonably assess the timing or outcome of theinvestigation or its effect, if any, on the Company’s business.

 

Other than as set forth above or as previouslyreported in our Annual Report on Form 10-K for the fiscal year ended May 31,2007, as amended, the Company is not currently subject to any material legalproceedings, nor, to the Company’s knowledge, is any material legal proceedingthreatened against the Company.  However,from time to time, the Company may become a party to certain legal proceedingsin the ordinary course of business. Management does not believe any ongoinglegal proceedings, including those summarized above, will have a materialadverse effect on the Company’s consolidated financial position.

 

# **12.****      ****RECENTACCOUNTING PRONOUNCEMENTS**

#  

*Incometaxes*

 

In July 2006, theFinancial Accounting Standard Board (“FASB”) issued FIN 48.  FIN 48 clarifies the accounting foruncertainty in income taxes recognized in an entity’s financial statements inaccordance with  SFAS No. 109, “*Accounting for Income Taxes*” and prescribes a recognitionthreshold and measurement attributes for financial statement disclosure of taxpositions taken or expected to be taken on a tax return.  Under FIN 48, the impact of an uncertainincome tax position on an income tax return must be recognized at the largestamount that is more-likely-than-not to be sustained upon audit by the relevanttaxing authority.  An uncertain incometax position will not be recognized if it has less than a 50% likelihood ofbeing sustained.  Additionally, FIN 48provides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition. The Companyimplemented FIN 48 effective June 1, 2007. A more detailed discussion ofthe effect of the adoption of FIN 48 is included in Note 7, “Income Taxes.”

 

*Fairvalue measurements*

 

In September 2006,the FASB issued SFAS No. 157, “*Fair Value Measurements*”.SFAS No. 157 provides guidance for using fair value to measure assets andliabilities. This standard also responds to investors’ requests for expandedinformation about the extent to which companies measure assets and liabilitiesat fair value, the information used to measure fair value and the effect offair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit)assets or liabilities to be measured at fair value. The

 

16

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standard does not expandthe use of fair value in any new circumstances. SFAS No. 157 is effectivefor the Company in its fiscal year beginning June 1, 2008. The Companydoes not believe SFAS No. 157 will have a material impact on its resultsof operation or financial position.

 

*Fairvalue option for certain financial instruments*

 

In February 2007,the FASB issued SFAS No. 159, “*The Fair Value Option forFinancial Assets and Financial Liabilities,*” which gives entitiesthe option to measure eligible financial assets, financial liabilities and firmcommitments at fair value (i.e., the fair value option), on aninstrument-by-instrument basis, that are otherwise not permitted to beaccounted for at fair value under other accounting standards.  The election to use the fair value option isavailable when an entity first recognizes a financial asset or financialliability or upon entering into a firm commitment. Subsequent changes in fairvalue must be recorded in earnings. SFAS No. 159 is effective for the Company in its fiscal yearbeginning June 1, 2008. The Company is currently assessing the effect ofimplementing this guidance, which is dependent upon the nature and extent ofeligible items elected to be measured at fair value upon initial application ofthe standard.  However, the Company doesnot expect the adoption of SFAS No. 159 to have a material impact on itsresults of operation or financial position.

 

*Advancepayments for research and development activities*

 

In June 2007, theEmerging Issues Task Force (“EITF”) issued EITF 07-3, “*Accountingfor Nonrefundable Advance Payments for Goods or Services to Be Used in FutureResearch and Development Activities*” (“EITF 07-3”). EITF 07-3addresses the diversity that exists with respect to the accounting for thenon-refundable portion of a payment made by a research and development entityfor future research and development activities. The EITF concluded that anentity must defer and capitalize non-refundable advance payments made forresearch and development activities until the related goods are delivered orthe related services are performed. Entities should continue to evaluate whether they expect the goods to bedelivered or services to be rendered.  Ifan entity does not expect the goods to be delivered or services to be rendered,the capitalized advance payment should be charged to expense.  EITF 07-3 is effective for the Company in itsfiscal year beginning June 1, 2008. The Company does not believe theadoption of EITF 07-3 will have a material impact on its results ofoperations or financial position.

 

*Use of aSimplified Method in Developing Expected Term of Share Options*

 

In December 2007,the SEC issued Staff Accounting Bulletin (“SAB”) No. 110, *“Use of a Simplified Method in Developing Expected Term of Share Options”*.SAB 110 expresses the current view of the staff that it will accept a company’selection to use the simplified method discussed in SAB 107 for estimating theexpected term of “plain vanilla” share options regardless of whether thecompany has sufficient information to make more refined estimates. The staffnoted that it understands that detailed information about employee exercisepatterns may not be widely available by December 31, 2007. Accordingly,the staff will continue to accept, under certain circumstances, the use of thesimplified method beyond December 31, 2007. As permitted by SAB 110, theCompany continues to use the simplified method as the company does not havesufficient historical data to estimate the expected term of share based awards.

 

*BusinessCombinations*

 

In December 2007,the FASB issued SFAS No. 141(R), *“Business Combinations”.*SFAS 141(R) will significantly change the financial accounting andreporting of business combination transactions. SFAS 141(R) establishesprinciples for how an acquirer recognizes and measures the identifiable assetsacquired, liabilities assumed, and any noncontrolling interest in the acquiree;recognizes and measures the goodwill acquired in the business combination or again from a bargain purchase; and determines what information to disclose toenable users of the financial statements to evaluate the nature and financialeffects of the business combination. SFAS 141(R) is effective foracquisition dates on or after the beginning of an entity’s first year thatbegins after December 15, 2008. The Company will adopt the provisions ofSFAS No. 141R to any business combination occurring on or after June 1,2009, as required.

 

*Non-controllingInterests in Consolidated Financial Statements*

 

In December 2007, theFASB issued SFAS No. 160, “*Non-controllingInterests in Consolidated Financial Statements, an Amendment of ARB No. 51*”. This statement establishesaccounting and reporting standards for

 

17

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the non-controllinginterest in a subsidiary and for the deconsolidation of a subsidiary. Thisstatement is effective for fiscal years beginning on or after December 15,2008. The Company does not expect the adoption of SFAS 160 to have a materialeffect on its consolidated financial statements.

 

## **ITEM 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

## ** **

*Certainstatements that the Company may make from time to time, including allstatements contained in this report that are not statements of historical fact,constitute “forward-looking statements” within the meaning of the PrivateSecurities Litigation Reform Act of 1995 and the safe harbor provisions setforth in Section 27A of the Securities Act of 1933 and Section 21E ofthe Securities Exchange Act of 1934. Forward-looking statements may beidentified by words such as “plans,” “expects,” “believes,” “anticipates,” “estimates,”“projects,” “will,” “should” and other words of similar meaning used inconjunction with, among other things, discussions of future operations,financial performance, product development and new product launches, FDA andother regulatory applications and approvals, market position andexpenditures.  Factors that could causeactual results to differ materially from those expressed in any forward-lookingstatement made by, or on behalf of, the Company include the following, some ofwhich are described in greater detail below: lower than expected marketacceptance of the Company’s new Galileo Echo instrument; the decision ofcustomers to defer capital spending; the inability of customers to efficientlyintegrate the Company’s instruments into their blood banking operations;increased competition in the sale of instruments and reagents, particularly inNorth America; product development or regulatory obstacles; the ability to hireand retain key managers; changes in interest rates; fluctuations in foreigncurrency conversion rates; the ability of the Company’s Japanese subsidiary toattain expected revenue, gross margin and net income levels; the outcome of anylegal claims or regulatory investigations known or unknown; delays inregulatory approvals required to manufacture products previously produced inHouston; higher than expected manufacturing consolidation costs; the unexpectedapplication of different accounting rules; and general economic conditions. Inaddition, the strengthening of the US Dollar versus the Euro, Canadian Dollarand Japanese Yen would adversely impact reported results. Investors arecautioned not to place undue reliance on any forward-looking statements.  The Company cautions that historical resultsshould not be relied upon as indications of future performance.  The Company assumes no obligation to updateany forward-looking statements.*  *Additional informationconcerning these and other factors which could cause differences betweenforward-looking statements and future actual results is discussed under theheading “Risk Factors” in the Company’s Annual Report on Form 10-K for theyear ended May 31, 2007.*

 

**Overview**

 

*Our Business*

 

We develop, manufacture, and sell a complete line of reagents andautomated systems used primarily by hospitals, clinical laboratories and bloodbanks in tests performed to detect and identify certain properties of human bloodprior to the transfusion of blood and blood components. We have manufacturingfacilities in the United States and Canada. We sell our products from thesefacilities and through our affiliates in Germany, Italy, Belgium, Spain,Portugal, France and Japan.

 

The FDA regulates all aspects of the immunohematology industry,including marketing of reagents and instruments used to detect and identifyblood properties. Our industry has been very labor intensive, but in recentyears it has made noticeable advances in automating certain manualprocesses.  We believe that companiesthat have successfully introduced new technologies and automated products haveseen their profitability improve.

 

We have introducedseveral instruments in the past, and we continue to focus on developing newinstruments and improving our existing instruments. In June 2007, wereceived FDA clearance to market our latest instrument, EchoTM, which is acompact bench top, fully-automated walk-away instrument for small- andmedium-sized hospitals, blood banks and transfusion laboratories.  EchoTM uses Capture products, our proprietaryreagents, and offers an extensive test menu and significant labor reductionwhile increasing productivity and patient safety. We expect to increase ourmarket share and revenues from the sale of EchoTM and Galileo® instruments andthe sale of Capture products in the near term. Instruments and Capture productscurrently account for approximately 30% of our revenues.

 

18

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*BioArrayacquisition*

 

On March 11, 2008, we signed a definitiveagreement to acquire BioArray Solutions Ltd. (“BioArray”), a privately heldcompany based in Warren, NJ for approximately $117 million in cash. BioArrayhas pioneered the development of molecular diagnostic systems which enable theDNA typing (genotyping) of blood for transfusion donors and recipients. Closingof this acquisition is conditioned upon, among other matters, receipt ofregulatory approvals including pre-merger notification clearance under theHart-Scott-Rodino Antitrust Improvement Act.

 

BioArray has developed, patented and introduced itsBeadChipTM system for molecular medicine, which uses arrays of proprietarymicroparticles to analyze DNA.  Itsrecently launched transfusion genotyping system, which has not yet received FDAapproval, is currently installed in a number of leading donor and transfusioncenters for research applications.  Wewill acquire in this transaction the broad intellectual property portfolioBioArray has generated through its substantial investments in research anddevelopment, including approximately 100 issued or pending patents.   BioArray will continue to be based inWarren, NJ and operate under the BioArray name.

 

We believe that the acquisition will enable us toprovide innovative molecular diagnostic solutions for the blood transfusionmarket that complement our current product line, and that our leadership inblood banking industry automation and BioArray’s leadership in moleculardiagnostic systems for specialty transfusion applications should allow us todevelop and deliver more precise genotyping solutions to enhance patientoutcomes. We also believe our capabilities in providing automated platformsolutions, FDA licensing experience, established distribution network andfinancial resources will facilitate a more rapid and extensive introduction ofBioArray’s BeadChipTM products than BioArray could accomplish on its own. Wealso believe that this acquisition will open up broader opportunities for us intransplantation and transfusion-related applications.

 

BioArray has formed a new company intended tocommercialize BioArray technologies in fields outside of blood transfusion andtransplantation.  If the acquisitioncloses, the current equity holders of BioArray will hold 81% ownership interestin the new company, and Immucor, through BioArray and for no additionalconsideration, will hold a 19% ownership interest.

 

Prior to execution of themerger agreement, three key employees of BioArray entered into employmentagreements with us that would take effect upon completion of the merger. Inaddition, these three employees and three other key employees of BioArrayentered into separate non-competition agreements with us that would take effectupon completion of the merger.

 

We expect this acquisition to be materially dilutiveto earnings per share for several years following closing as key investmentsare made in research, development, and the automation and marketing of theBioArray product line.  In our first fullyear of ownership, we expect that this acquisition will reduce diluted earningsper share by approximately $0.20 to $0.23 per share, including approximately$0.05 per share of non-cash amortization of acquired intangible assets.

 

*Performance*

 

In fiscal 2008, we continue to focus on increasing revenue and marketshare. We have concentrated our efforts on successfully marketing the EchoTM,which received FDA clearance in June 2007. As part of this effort, infiscal 2008 we have continued to critically examine our organizationalstructure and modify it where necessary, including the hiring and training ofadditional sales, technical and contracting personnel to ensure the smoothintroduction of the EchoTM. We also continue to place Galileo® instruments in themarket.

 

As of February 29,2008, we had received orders for a total of 562 Galileo® instruments worldwide(an increase of 22 instruments in the third quarter of fiscal 2008), including315 in Europe, 245 in North America and 2 in Japan, and approximately 516 ofthese Galileo® instruments were generating reagent revenues, an increase of 38instruments in the third quarter of fiscal 2008. As of February 29, 2008,we had received orders for a total of 155 EchoTM instruments worldwide (anincrease of 70 instruments in the third quarter of fiscal 2008), including 44 in Europe, 107 in North Americaand 4 in Japan, and at least 43 of these EchoTM instruments were generating reagent revenues, an increase ofapproximately 30 live instruments in the third quarter of fiscal 2008.

 

19

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Revenue increased by 17%and 18% during the three months and nine months ended February 29, 2008,respectively, compared to revenue earned in the corresponding periods of fiscal2007. These improvements were largely attributable to the price increases inour traditional reagents (reagents not using our patented Capture technology)introduced in prior fiscal years, and to a lesser extent due to exchange gainsand sales volume increases in Capture products and instruments.

 

In the third quarter offiscal 2008, our operating expenses rose by 11% while gross profit increased by20%, which translated into a 28% increase in net income compared to the thirdquarter of fiscal 2007. In the nine months ended February 29, 2008, ouroperating expenses rose by 16% while gross profit increased by 21%, whichtranslated into a 27% increase in net income compared to the correspondingperiod of fiscal 2007. Expenses relating to the EchoTM launch contributed to ahigher percentage increase in operating expenses than we experienced in fiscal2007. In addition, the adoption of FAS 123R in June 2006 resulted in additionalcharges not recorded in income statements in previous fiscal years. In the ninemonths ended February 29, 2008 and February 28, 2007, $3.0 millionand $2.5 million, respectively, were recorded as additional charges forshare-based compensation.

 

*Business Outlook*

 

For fiscal 2008, our primary focus has been and willbe to successfully introduce and market the new Echo*TM*to small- and medium-size customers. We will also continue to focus on placingGalileo® instruments with larger customers. Over the next few years, we expectour core business to shift gradually from being mainly a supplier oftraditional reagents to being a major supplier of automated instruments thatuse our proprietary Capture technology and products. We expect to complete ourdevelopment of the next generation of the Galileo® with additional and improvedfeatures in the 2008 calendar year, and we expect to submit it to the FDA forclearance in the 2009 calendar year.

 

We have decided to sell our products directly inFrance instead of through a distributor, and we have developed a transitionplan with Bio-Rad Laboratories, Inc., our current distributor. Because ourmarketing efforts in France will be disrupted during the transition, we expectinstrument revenue and related reagent revenue to be lower in France in fiscal2008 than originally expected.  However, this expected shortfall will notbe material to our overall results. In the nine months ended February 29,2008, we have spent approximately $0.6 million and expect to incur additionalexpenses in the remainder of fiscal 2008 to establish the new organization inFrance.

 

**Resultsof Operations**

 
| ** **                | ** ** | **Three Months Ended** | ** ** | ** **                     | ** ** | ** ** | ** ** | **Nine Months ­Ended** | ** ** | ** **                     | ** ** | ** ** | ** ** |
|---------------------------|------------|----------------------------------|------------|--------------------------------|------------|------------|------------|---------------------------------------|------------|--------------------------------|------------|------------|------------|
| ** **                | ** ** | **February 29,**            | ** ** | **February 28,**          | ** ** | **Change** | ** ** | **February 29,**                 | ** ** | **February 28,**          | ** ** | **Change** | ** ** |
| ** **                | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **Amount** | ** ** | **%**                                 | ** ** | **2008**                       | ** ** | **2007**   | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                | ** ** | ** **                       | ** ** | **($ in thousands)** | ** ** | ** ** | ** ** | ** **                            | ** ** | **($ in thousands)** | ** ** | ** ** | ** ** |
| Net Sales                 |       | $                                | 67,029     |                           | $          | 57,091     |       | $                                     | 9,938      |                           | 17%        |       | $          | 192,585 |   | $ | 162,557 |   | $ | 30,028 |   | 18% |   |
| Gross profit              |       | 48,341                           |       | 40,353                         |       | 7,988      |       | 20%                                   |       | 136,096                        |       | 112,732    |       | 23,364 |   | 21% |   |
| Gross profit  percentage  |       | 72                               | %          | 71                             | %          | n/m        |       | 1%                                    |       | 71                             | %          | 69         | %          | n/m |   | 1% |   |
| Operating  expenses       |       | 19,247                           |       | 17,296                         |       | 1,951      |       | 11%                                   |       | 56,534                         |       | 48,567     |       | 7,967 |   | 16% |   |
| Income from  Operations   |       | 29,094                           |       | 23,057                         |       | 6,037      |       | 26%                                   |       | 79,562                         |       | 64,165     |       | 15,397 |   | 24% |   |
| Non-operating  income     |       | 1,135                            |       | 711                            |       | 424        |       | 60%                                   |       | 3,285                          |       | 1,742      |       | 1,543 |   | 89% |   |
| Income before  income tax |       | 30,229                           |       | 23,768                         |       | 6,461      |       | 27%                                   |       | 82,847                         |       | 65,907     |       | 16,940 |   | 26% |   |
| Provision for  income tax |       | 10,963                           |       | 8,749                          |       | 2,214      |       | 25%                                   |       | 29,667                         |       | 24,050     |       | 5,617 |   | 23% |   |
| Net income                |       | $                                | 19,266     |                           | $          | 15,019     |       | $                                     | 4,247      |                           | 28%        |       | $          | 53,180 |   | $ | 41,857 |   | $ | 11,323 |   | 27% |   |
|                           |            |                                  |            |                                |            |            |            |                                       |            |                                |            |            |            |  |  |  |  |  |  |  |  |  |  |  |

 

Improved sales, along with a proportionately lowerincrease in operating expenses, resulted in an increase in net income of $4.2million and $11.3 million for the three-month and nine-month periods of fiscal2008, respectively, which translate into a 28% and a 27% increase over thecorresponding periods of fiscal 2007, respectively. Diluted earnings per sharetotaled $0.27 and $0.75 for the three-month and nine-month periods of fiscal2008, respectively, as compared to diluted earnings per share of $0.21 and$0.59 for the corresponding periods of fiscal 2007, respectively.

 

United States operationscontinue to generate the majority of our revenue and operating income. U.S.operations generated 73% and 90%, respectively, of our revenue and operatingincome in the nine months ended February 29, 2008 compared to 73% and 92%,respectively, in the corresponding period of fiscal 2007.

 

20

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*Net Sales*

 
| ** **            | ** ** | **Three Months Ended** | ** ** | ** **                     | ** ** | ** ** | ** ** | **Nine Months Ended** | ** ** | ** **                     | ** ** | ** ** | ** ** |
|-----------------------|------------|----------------------------------|------------|--------------------------------|------------|------------|------------|---------------------------------|------------|--------------------------------|------------|------------|------------|
| ** **            | ** ** | **February 29,**            | ** ** | **February 28,**          | ** ** | **Change** | ** ** | **February 29,**           | ** ** | **February 28,**          | ** ** | **Change** | ** ** |
| ** **            | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **Amount** | ** ** | **%**                           | ** ** | **2008**                       | ** ** | **2007**   | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **            | ** ** | ** **                       | ** ** | **($ in thousands)** | ** ** | ** ** | ** ** | ** **                      | ** ** | **($ in thousands)** | ** ** | ** ** | ** ** |
| Traditional  reagents |       | $                                | 45,713     |                           | $          | 41,390     |       | $                               | 4,323      |                           | 10%        |       | $          | 133,814 |   | $ | 115,939 |   | $ | 17,875 |   | 15% |   |
| Capture products      |       | 14,167                           |       | 10,247                         |       | 3,920      |       | 38%                             |       | 38,345                         |       | 30,789     |       | 7,556 |   | 25% |   |
| Instruments           |       | 7,149                            |       | 4,407                          |       | 2,742      |       | 62%                             |       | 18,729                         |       | 12,557     |       | 6,172 |   | 49% |   |
| Collagen              |       | —                           |       | 1,047                          |       | (1,047     | )          | -100%                           |       | 1,697                          |       | 3,272      |       | (1,575 | ) | -48% |   |
|                  |       | $                                | 67,029     |                           | $          | 57,091     |       | $                               | 9,938      |                           | 17%        |       | $          | 192,585 |   | $ | 162,557 |   | $ | 30,028 |   | 18% |   |

 

Of the $9.9 million total increase in revenues in thethird quarter of fiscal 2008 compared to the corresponding quarter of fiscal2007, approximately $4.6 million came from price increases in the UnitedStates, approximately $1.6 million came from volume increases in the UnitedStates, approximately $2.1 million was attributable to the effect of thechanges in the Euro, Japanese Yen and Canadian dollar exchange rates andapproximately $1.6 million came from sales increases, including instrumentrevenues, outside the United States. 

 

Of the $30.0 million total increase in revenues in thenine months ended February 29, 2008 compared to the corresponding periodof fiscal 2007, approximately $19.9 million came from price increases in theUnited States, approximately $1.2 million came from volume increases in theUnited States, approximately $4.8 million was attributable to the effect of thechanges in the Euro, Japanese Yen and Canadian dollar exchange rates andapproximately $4.1 million came from sales increases, including instrumentrevenues, outside the United States.

 

The 10% and 15% growth in traditional reagent revenuein the three-month and nine-month periods ended February 29, 2008,respectively, compared to the corresponding periods of fiscal 2007 occurredmainly as a result of price increases in the United States. Traditional reagentsales have historically been our primary source of revenue and still constituteroughly 70% of our revenues. We expect the significance of this line ofproducts to gradually decline as we place more instruments in the market thatuse our proprietary Capture products.

 

Sales of Capture products increased by 38% and 25% inthe three-month and nine-month periods ended February 29, 2008,respectively, compared to the corresponding periods of fiscal 2007 mainly dueto volume increases. Sales of Capture products are largely dependent on thenumber of installed instruments requiring the use of Capture reagents. As wecontinue to place more instruments in the market, we expect revenue from Captureproducts to continue to increase.

 

Revenue from instruments increased by 62% and 49% inthe three-month and nine-month periods ended February 29, 2008,respectively, compared to the corresponding periods of fiscal 2007. Mostinstrument sales in the United States are recognized over the life of theunderlying reagent contract, which is normally five years. In the fiscal 2008quarter, $2.1 million of deferred revenue was recognized from previously placedinstruments compared to $1.2 million recognized in the 2007 quarter, andapproximately $4.1 million of instrument sales were deferred in this manner,compared to $1.9 million in the 2007 quarter. In the first nine months offiscal 2008, $5.8 million of deferred revenue was recognized from previouslyplaced instruments compared to $3.0 million recognized in the correspondingperiod of fiscal 2007, and in the 2008 fiscal period, approximately $10.2million of instrument sales were deferred in this manner, compared to $4.9million in the corresponding 2007 period. As of February 29, 2008 and February 28,2007, deferred instrument and service revenues totaled $24.8 million and $18.5million, respectively, which we expect to recognize over the next five years.

 

We discontinued manufacturing collagen products in thesecond quarter of fiscal 2008 when our commitment to a third party expired.This action resulted in a revenue decrease of $1.0 million and $1.6 million inthe three and nine-month periods ended February 29, 2008, respectively,compared to revenue earned from these products in the corresponding periods offiscal 2007.

 

21

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*Gross Margins*  

 
| ** **            | ** ** | **Three Months Ended** | ** ** | ** **            | ** ** | **Nine Months Ended** | ** ** | ** **            | ** ** |
|-----------------------|------------|----------------------------------|------------|-----------------------|------------|---------------------------------|------------|-----------------------|------------|
| ** **            | ** ** | **February 29,**            | ** ** | **February 28,** | ** ** | ** **                      | ** ** | **February 29,** | ** ** | **February 28,** | ** ** | ** ** | ** ** |
| ** **            | ** ** | **2008**                         | ** ** | **2007**              | ** ** | **Change**                      | ** ** | **2008**              | ** ** | **2007** | ** ** | **Change** | ** ** |
| ** **            | ** ** | **Amount**                       | ** ** | **Margin %**     | ** ** | **Amount**                      | ** ** | **Margin %**     | ** ** | **Amount** | ** ** | **Amount** | ** ** | **Margin %** | ** ** | **Amount** | ** ** | **Margin %** | ** ** | **Amount** | ** ** |
| ** **            | ** ** | **(in ’000)**          | ** ** | ** **            | ** ** | **(in ’000)**         | ** ** | ** **            | ** ** | **(in ’000)** | ** ** | **(in ’000)** | ** ** | ** ** | ** ** | **(in ’000)** | ** ** | ** ** | ** ** | **(in ’000)** | ** ** |
| Traditional  reagents |       | $36,351                          |       | 80%                   |       | $31,245                         |       | 75%                   |       | $5,106 |   | $104,369 |   | 78% |   | $86,706 |   | 75% |   | $17,663 |   |
| Capture products      |       | 12,130                           |       | 86%                   |       | 8,849                           |       | 86%                   |       | 3,281 |   | 32,566 |   | 85% |   | 25,668 |   | 83% |   | 6,898 |   |
| Instruments           |       | (140                             | )          | -2%                   |       | 23                              |       | 1%                    |       | (163 | ) | (856 | ) | -5% |   | (551 | ) | -4% |   | (305 | ) |
| Collagen              |       | —                           |       | 0%                    |       | 236                             |       | 23%                   |       | (236 | ) | 17 |   | 1% |   | 909 |   | 28% |   | (892 | ) |
|                  |       | $48,341                          |       | 72%                   |       | $40,353                         |       | 71%                   |       | $7,988 |   | $136,096 |   | 71% |   | $112,732 |   | 69% |   | $23,364 |   |

 

Our overall gross margin increased to 72% during thethird quarter of fiscal 2008 from 71% achieved in the corresponding quarter offiscal 2007. Improvement in traditional reagent margin of 5% was the primarilycontributor to the 1% overall improvement in gross margin for the thirdquarter.

 

For the nine months ended February 29, 2008, ouroverall gross margin increased to 71% from 69% achieved in the correspondingperiod of fiscal 2007. Improvements in margins of traditional reagents andCapture products by 3% and 2%, respectively, contributed to the 2% increase inthe overall margin during the nine months ended February 29, 2008 comparedto the overall margin achieved in the corresponding period of fiscal 2007.

 

Gross margins on traditional reagents increased to 80%during the third quarter of fiscal 2008 from 75% during the correspondingquarter of fiscal 2007. Gross margin on traditional reagents improved by 3% to78% in the nine-month period ended February 29, 2008 compared to thecorresponding period of fiscal 2007. These gross margin increases wereprimarily due to price increases.

 

The gross margin on Capture products was 86% duringthe third quarter of fiscal 2008 and fiscal 2007. During the nine months ended February 28,2008, the gross margin on Capture products increased by 2% to 85% compared tothe corresponding nine-month period of fiscal 2007. This improvement waslargely impacted by a reduction in royalty expenses. In the nine-month periodended February 28, 2007, we paid royalties of $0.2 million under anagreement which expired in fiscal 2007 for certain Capture products; we did notincur any royalty expenses for these products in the nine-month period ended February 29,2008.

 

In the case of instruments, comparing gross marginfrom period to period can be misleading due to the method of accounting usedfor revenue and cost for certain types of instrument sales. Where salescontracts have price guarantee clauses, instrument costs are expensed when thesale is made, but the related revenue is deferred and recorded as income overthe term of the contract. For the three-month and nine-month periods ended February 29,2008, the gross margin on instruments was negative 2% and negative 5%,respectively, compared to 1% and negative 4%, respectively, for thecorresponding periods in fiscal 2007.

 

*Operating Expenses*   

 
| ** **                      | ** ** | **Three Months Ended** | ** ** | ** **            | ** ** | ** **                     | ** ** | **Nine Months Ended** | ** ** | ** **            | ** ** | ** ** | ** ** |
|---------------------------------|------------|----------------------------------|------------|-----------------------|------------|--------------------------------|------------|---------------------------------|------------|-----------------------|------------|------------|------------|
| ** **                      | ** ** | **February 29,**            | ** ** | **February 28,** | ** ** | **Change**                     | ** ** | **February 29,**           | ** ** | **February 28,** | ** ** | **Change** | ** ** |
| ** **                      | ** ** | **2008**                         | ** ** | **2007**              | ** ** | **Amount**                     | ** ** | **%**                           | ** ** | **2008**              | ** ** | **2007**   | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                      | ** ** | **($ in thousands)**   | ** ** | ** **            | ** ** | **($ in thousands)** | ** ** | ** **                      | ** ** |
| Research and  development       |       | $                                | 1,522      |                  | $          | 1,624                          |       | $                               | (102       | )                     | -6%        |       | $          | 5,011 |   | $ | 4,658 |   | $ | 353 |   | 8% |   |
| Selling and  marketing          |       | 7,605                            |       | 6,850                 |       | 755                            |       | 11%                             |       | 23,019                |       | 19,164     |       | 3,855 |   | 20% |   |
| Distribution                    |       | 2,881                            |       | 2,393                 |       | 488                            |       | 20%                             |       | 8,212                 |       | 7,061      |       | 1,151 |   | 16% |   |
| General and  administrative     |       | 7,228                            |       | 6,271                 |       | 957                            |       | 15%                             |       | 19,385                |       | 16,784     |       | 2,601 |   | 15% |   |
| Restructuring  expense          |       | (77                              | )          | 72                    |       | (149                           | )          | -207%                           |       | 646                   |       | 641        |       | 5 |   | 1% |   |
| Amortization  expense and other |       | 88                               |       | 86                    |       | 2                              |       | 2%                              |       | 261                   |       | 259        |       | 2 |   | 1% |   |
| Total operating  expenses       |       | $                                | 19,247     |                  | $          | 17,296                         |       | $                               | 1,951      |                  | 11%        |       | $          | 56,534 |   | $ | 48,567 |   | $ | 7,967 |   | 16% |   |
|                                 |            |                                  |            |                       |            |                                |            |                                 |            |                       |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Selling and marketing expenses increased byapproximately $0.8 million and $3.9 million for the three-month and nine-monthperiods ended February 29, 2008, respectively, compared to thecorresponding periods of fiscal 2007. These expenses were impacted primarily bynew hires, annual salary increases and other salary related expenses and anincrease in sales meetings, conventions and travel expenses. A significantamount of these expenses related to the launch of the EchoTM instrument infiscal 2008.

 

General and administrative expenses increased by $1.0million in the third quarter of fiscal 2008 compared to the corresponding 2007quarter; $0.9 million of the increase related to personnel costs andconsultancy fees.

 

22

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General and administrative expenses increased by $2.6million in the nine-month period ended February 29, 2008 compared to thecorresponding 2007 fiscal period; the major variation was an increase insalaries, new hires, share-based compensation and bonus expenses (approximately$1.9 million).

 

*Income Taxes*

 

The provision for income taxes increased $2.2 millionand $5.6 million in the three-month and nine-month periods ended February 29,2008, respectively, compared to the corresponding periods in fiscal 2007primarily due to higher pre-tax income. The effective income tax rate was 36.3%and 35.8% in the three-month and nine-month periods ended February 29,2008, respectively, compared with 36.8% and 36.5% in the three-month andnine-month periods ended February 28, 2007. The decrease in the effectiverate in the nine month period ended February 29, 2008 is principally dueto the reduction of the German income tax rate by approximately 10% and therecording of previously unclaimed research and development credits in fiscal2008 by the Canadian affiliate.

 

As a result of using compensation cost deductionsarising from the exercise of nonqualified employee stock options granted priorto June 1, 2006 for federal and state income tax purposes, we realizedincome tax benefits of approximately $0.3 million and $6.6 million in thethree-month and nine-month periods ended February 29, 2008, respectively,compared to $0.5 million and $10.0 million realized in the correspondingperiods of fiscal 2007. As required by U.S. generally accepted accountingprinciples, these income tax benefits are recognized in our financialstatements as additions to additional paid-in capital rather than as reductionsof the respective income tax provisions in the consolidated financialstatements because the related compensation deductions were not recognized ascompensation expense for financial reporting purposes. Our income tax liabilityis reduced by these amounts.

 

*Non-Operating Income*   

 
| ** **            | ** ** | **Three Months Ended** | ** ** | ** **                     | ** ** | **Nine Months Ended** | ** ** | ** **            | ** ** |
|-----------------------|------------|----------------------------------|------------|--------------------------------|------------|---------------------------------|------------|-----------------------|------------|
| ** **            | ** ** | **February 29,**            | ** ** | **February 28,**          | ** ** | **Change**                      | ** ** | **February 29,** | ** ** | **February 28,** | ** ** | **Change** | ** ** |
| ** **            | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **Amount**                      | ** ** | **2008**              | ** ** | **2007** | ** ** | **Amount** | ** ** |
| ** **            | ** ** | **($ in thousands)**   | ** ** | **($ in thousands)** | ** ** |
| Non-operating  income |       | $                                | 1,135      |                           | $          | 711                             |       | $                     | 424        |   | $ | 3,285 |   | $ | 1,742 |   | $ | 1,543 |   |
|                       |            |                                  |            |                                |            |                                 |            |                       |            |  |  |  |  |  |  |  |  |  |  |

 

The increases in non-operating income for thethree-month and nine-month periods of fiscal 2008 compared to the correspondingperiods of fiscal 2007 were primarily attributable to an increase in interestincome due to the increase in our cash balance.

 

*Net Income and Earnings per Share*

 

Higher sales and gross profit resulted in net incomeof $19.3 million, up 28% from $15.0 million for the third quarter compared tothe corresponding 2007 quarter and, for the nine-month period ended February 29,2008, higher sales and gross profit resulted in net income of $53.2 million, up27% from $41.9 million for the corresponding fiscal 2007 period. For the thirdquarter of fiscal 2008, diluted earnings per share were $0.27, up from $0.21for the corresponding fiscal 2007 quarter. For the nine-month period ended February 29,2008, diluted earnings per share were $0.75, up from $0.59 for the 2007 fiscalperiod.

 

**Liquidity and Capital Resources**

** **
| ** **                                                    | ** ** | **For the Nine Months Ended** | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                    | ** ** | **February 29, 2008**                   | ** ** | **February 28, 2007** | ** ** |
| ** **                                                    | ** ** | **(in thousands)**                           | ** ** |
| Net cash  provided by operating activities                    |       | $                                                 | 54,094     |   | $ | 39,020 |   |
| Net cash used in  investing activities                        |       | (8,562                                            | )          | (6,019 | ) |
| Net cash  provided by financing activities                    |       | 2,950                                             |       | 6,843 |   |
| Effect of  exchange rate changes on cash and cash equivalents |       | 1,818                                             |       | (224 | ) |
| Increase in cash  and cash equivalents                        |       | $                                                 | 50,300     |   | $ | 39,620 |   |

 

23

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** **

Our cash and cash equivalents were $163.9 million at February 29,2008, as compared to $113.6 million at May 31, 2007. Net income of $53.2million was the main contributing factor for the $50.3 million increase in ourcash and cash equivalents during the nine-month period ended February 29,2008.

 

*Operating Activities -* Net cash generated by operatingactivities was $54.1 million for the nine-month period ended February 29,2008 (the “2008 Period”), an increase of $15.1 million over the $39.0 milliongenerated in the nine-month period ended February 28, 2007 (the “2007Period”). This $15.1 million increase in cash generated by operating activitieswas principally due to the increase in net income of $11.3 million (from $41.9million for the 2007 Period to $53.2 million for the 2008 Period) and, amongother things, a change of approximately $3.4 million ($6.6 million for the 2008Period compared to $10.0 million for the 2007 Period) for the tax benefitarising on exercise of stock options (which is required to be disclosed as cashgenerated by financing activities since our adoption of SFAS 123R effective June 1,2006).

* *

*Investing Activities -* For the 2008 Period, $8.6 million of netcash was used in investing activities for the purchase of property andequipment. In the 2007 Period, we spent $7.7 million on the purchase ofproperty and equipment, offset by proceeds from the maturity of short terminvestments ($1.6 million).

* *

*Financing Activities –* In the 2008 Period, net cash provided byfinancing activities was $3.0 million, compared to $6.8 million of net cashprovided in the 2007 Period. During the 2008 Period, we had a cash outflow of$5.5 million for payment of withholding taxes in compliance with the statutorytax withholding requirements on exercise of options and vesting of restrictedshares in exchange for surrender of the Company’s shares of equal value. Thevalue of these reacquired shares is disclosed as ‘Repurchase of common stock’under financing activities in the condensed consolidated statement of cash flows.In the 2008 Period, we did not repurchase any shares in the open market underour stock repurchase program, compared to the $4.9 million used in the 2007Period for this purpose. We received $2.2 million and $2.6 million from theexercise of employee stock options in the 2008 Period and 2007 Period,respectively. We received $6.6 million and $10.0 million excess tax benefitsfrom share-based compensation for the 2008 Period and 2007 Period,respectively.

* *

*Stock Repurchase Program*

 

During the 2008 Period, we did not repurchase anyshares under our stock repurchase program. During the 2007 Period, 281,969shares amounting to $4.9 million were repurchased under this program. Anaggregate of 1,142,056 shares were available for repurchase under the programas of February 29, 2008.

 

*Contingent Liabilities*

 

We recordcontingent liabilities resulting from asserted and unasserted claims against uswhen it is probable that a liability has been incurred and the amount of theloss is reasonably estimable. We disclose contingent liabilities when there isa reasonable possibility that the ultimate loss will exceed the recordedliability. Estimating probable losses requires analysis of multiple factors, insome cases including judgments about the potential actions of third-partyclaimants and courts. Therefore, actual losses in any future period areinherently uncertain. We currently are involved in certain legal proceedings.We do not believe these proceedings will have a material adverse effect on ourconsolidated financial position. It is possible, however, that future resultsof operations for any particular quarterly or annual period could be materiallyaffected by changes in our assumptions or the effectiveness of our strategiesrelated to these proceedings. Contingent liabilities are described in Note 11to the condensed consolidated financial statements.

 

*Future Cash Requirements and Restrictions*

 

We expect that cash and cash equivalents and cashflows from operations will be sufficient to support operations and plannedcapital expenditures for at least the next 12 months, including the $117million purchase consideration payable for the acquisition of BioArray. Weexpect to continue to generate net positive cash flow although there will besome reduction in cash flow resulting from the BioArray operations after wecomplete the acquisition. In the longer term, we will be able to use a portionof BioArray’s net operating tax loss carryforwards, subject to certainconditions and limitations, which will positively impact cash flows.

 

There are no restrictions on our subsidiaries withrespect to sending dividends, or making loans or advances to Immucor.

 

24

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**CriticalAccounting Policies**

 

*General*

 

We have identified thepolicies below as critical to our business operations and to the understandingof our results of operations. The impact and any associated risks related tothese policies on our business operations are discussed throughout Management’sDiscussion and Analysis of Financial Condition and Results of Operations wheresuch policies affect our reported and expected financial results.  For a detailed discussion on the applicationof these and other accounting policies, see the notes to the condensedconsolidated financial statements of this quarterly report on Form 10-Qand the notes to the consolidated financial statements and the Management’sDiscussion and Analysis of Financial Condition and Results of Operationscontained in our Annual Report on Form 10-K for the fiscal year ended May 31,2007. Senior management has discussed the development and selection of criticalaccounting estimates and the related Management’s Discussion and Analysis ofFinancial Condition and Results of Operations disclosure with the AuditCommittee of our Board of Directors. We believe that our most criticalaccounting policies and estimates relate to the following:

 
| i.   |   | Revenue recognition                                            |
|------|--------|----------------------------------------------------------------|
| ii.  |   | Trade accounts  receivable and allowance for doubtful accounts |
| iii. |   | Inventories                                                    |
| iv.  |   | Goodwill                                                       |
| v.   |   | Income taxes                                                   |
| vi.  |   | Share-based  compensation                                      |

 

*i)Revenue Recognition*

 

In accordance with theStaff Accounting Bulletin No. 104, “*Revenue Recognition”*, guidance, werecognize revenue when the following four basic criteria have been met:  (1) persuasive evidence of anarrangement exists; (2) delivery has occurred or services are rendered; (3) thefee is fixed and determinable; and (4) collectibility is reasonablyassured.  Should changes in conditionscause management to determine these criteria are not met for certain futuretransactions, revenue recognized for any reporting period could be adverselyaffected.

 

·                  Reagent sales

Revenue from the sale ofour reagents to end users is recognized upon shipment when both title and riskof loss transfer to the customer, unless there are specific contractual termsto the contrary.  Revenue from the saleof our reagents to distributors is recognized FOB customs clearance when bothtitle and risk of loss transfer to the customer.

 

·                  Medicalinstrument sales

Revenue from the sale ofour medical instruments without multiple deliverables is generally recognizedupon shipment and completion of contractual obligations.  Revenue from rentals of our medical instrumentsis recognized over the term of the rental agreement.  Instrument service contract revenue isrecognized over the term of the contract.

 

In cases of sales ofinstruments with multiple deliverables, we recognize revenue in accordance withEmerging Issues Task Force (“EITF”) Issue No. 00-21, “*Accounting for Revenue Arrangements with MultipleDeliverables”*. Our medical instrument sales contracts with multipledeliverables generally include the sale or rental of an instrument (includingdelivery, installation and training), the servicing of the instrument duringthe first year, and, in many cases, price guarantees for consumables purchasedduring the contract period.  We havedetermined the fair value of certain of these elements, such as training and firstyear service.  The portion of theinstrument sales price applicable to the instrument itself is recognized uponshipment and completion of contractual obligations relating to training and/orinstallation.  If the agreement does notinclude any price guarantees, the sales price in excess of the fair values oftraining and service is allocated to the instrument itself.  The fair value of a training session isrecognized as revenue when services are provided.  If multiple training sessions are contractuallyprovided, then additional training revenue is recognized upon delivery.  The fair value of first year service isrecognized over the first year of the contract. If the agreement contains price guarantees, the entire arrangementconsideration is deferred and recognized over the related guarantee period dueto the fair 

 

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value of the priceguarantee not being determinable at the point of sale.  The allocation of the total consideration,which is based on the estimated fair value of the units of accounting, requiresjudgment by management.

 

ii) *TradeAccounts Receivable and Allowance for Doubtful Accounts*

 

Trade receivables at February 29, 2008, totaling $54.4 million,and at May 31, 2007, totaling $47.8 million, are net of allowances fordoubtful accounts of $1.9 million and $1.7 million, respectively. The allowancefor doubtful accounts represents a reserve for estimated losses resulting fromthe inability of our customers to pay their debts. The collectibility of tradereceivable balances is regularly evaluated based on a combination of factorssuch as customer credit-worthiness, past transaction history with the customer,current economic industry trends and changes in customer payment patterns.  If it is determined that a customer will beunable to fully meet its financial obligation, such as in the case of abankruptcy filing or other material events impacting its business, a specificallowance for doubtful accounts is recorded to reduce the related receivable tothe amount expected to be recovered.

 

*iii)Inventories*

 

Inventories are stated atthe lower of cost (first-in, first-out basis) or market (net realizablevalue).  Cost includes material, laborand manufacturing overhead.  We use a standardcost system as a tool to monitor production efficiency. The standard costsystem applies estimated labor and manufacturing overhead factors to inventorybased on budgeted production and efficiency levels, staffing levels and costsof operation, based on the experience and judgment of management. Actual costsand production levels may vary from the standard established and such variancesare charged to the consolidated statement of income as a component of cost ofsales.  Since U.S. generally acceptedaccounting principles require that the standard cost approximate actual cost,periodic adjustments are made to the standard rates to approximate actualcosts.  The provision for obsolete and/orexcess inventory is reviewed on a quarterly basis or, if warranted bycircumstances, more frequently. In evaluating this reserve, managementconsiders technology changes, competition, customer demand, product shelf lifeand manufacturing quality.  No materialchanges have been made to the inventory policy during the third quarter offiscal 2008.

 

*iv)Goodwill*

 

On adoption of Statementof Financial Accounting Standard No. 142, “*Goodwill andOther Intangible Assets”,* goodwill and indefinite lived intangibleassets are no longer amortized but are tested for impairment annually or morefrequently if impairment indicators arise. Intangible assets that have finite lives continue to be amortized overtheir useful lives.

 

We evaluate the carryingvalue of goodwill as at the end of the third quarter of each year and betweenannual evaluations if events occur or circumstances change that would morelikely than not reduce the fair value of the reporting unit below its carryingamount. Such circumstances could include, but are not limited to: (1) asignificant adverse change in legal factors or in business climate, (2) unanticipatedcompetition, or (3) an adverse action or assessment by a regulator. Whenevaluating whether goodwill is impaired, we compare the fair value of thereporting unit to which the goodwill is assigned to the reporting unit’scarrying amount, including goodwill.  Thefair value of the reporting unit is estimated using primarily the income, ordiscounted cash flows, approach. If the carrying amount of a reporting unitexceeds its fair value, then the amount of the impairment loss must bemeasured.  The impairment loss would becalculated by comparing the implied fair value of the reporting unit’s goodwillto its carrying amount.  In calculatingthe implied fair value of the reporting unit’s goodwill, the fair value of thereporting unit is allocated to all of the other assets and liabilities of thatunit based on their fair values.  Theexcess of the fair value of a reporting unit over the amount assigned to itsother assets and liabilities is the implied fair value of goodwill. Animpairment loss would be recognized when the carrying amount of goodwillexceeds its implied fair value.

 

*v) IncomeTaxes*

 

We record the estimatedfuture tax effects of temporary differences between the tax bases of assets andliabilities and amounts reported in the accompanying consolidated balancesheets, as well as operating loss and tax credit carry-forwards. The value ofour deferred tax assets assumes that we will be able to generate sufficientfuture 

 

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taxable income in certaintax jurisdictions, based on estimates and assumptions. If these estimates andrelated assumptions change in the future, we may be required to recordadditional valuation allowances against our deferred tax assets resulting inadditional income tax expense in our consolidated statements of income. Inassessing the realizability of deferred tax assets, we consider whether it ismore likely than not that some portion or all of the deferred tax assets willnot be realized, and we consider the scheduled reversal of deferred taxliabilities, projected future taxable income, carry-back opportunities, andtax-planning strategies in making this assessment.  We assess the need for additional valuationallowances quarterly.

 

The calculation of taxliabilities involves significant judgment in estimating the impact ofuncertainties in the application of complex tax laws. Although FIN 48, which weadopted at the beginning of fiscal 2008, provides further clarification on theaccounting for uncertainty in income taxes recognized in the financialstatements, the new threshold and measurement attribute prescribed by the FASBwill continue to require significant judgment by management. Resolution ofthese uncertainties in a manner inconsistent with our expectations could have amaterial impact on our results of operations.

 

*vi)Share-based Employee Compensation*

 

We adopted Statement ofFinancial Accounting Standard No. 123R, “*Share-BasedPayment”* (“SFAS 123(R)”), on June 1, 2006, using the modifiedprospective transition method, which requires that (i) compensation costsbe recorded as earned for all unvested stock options outstanding at thebeginning of the first fiscal year of adoption of SFAS 123(R) based on thegrant date fair value estimated in accordance with the original provisions ofStatement of Financial Accounting Standard No. 123, “*Accountingfor Stock-Based Compensation”*, and (ii) compensation costs forall share-based payments granted or modified subsequent to the adoption berecorded, based on the grant date fair value estimated in accordance with theprovisions of SFAS 123(R). On adoption of SFAS 123(R), we elected to attributethe value of share-based compensation to expense using the straight-linemethod, which was previously used for disclosing our pro forma informationrequired under SFAS 123.

 

We elected to value ourshare-based payment awards using the Black-Scholes option-pricing model (the “Black-Scholesmodel”), which was previously used for disclosing our pro forma informationrequired under SFAS 123. The Black-Scholes model was developed for use inestimating the fair value of traded options that have no vesting restrictionsand are fully transferable.  TheBlack-Scholes model requires the input of certain assumptions. Our stockoptions have characteristics significantly different from those of tradedoptions, and changes in the assumptions can materially affect the fair valueestimates.

 

We have calculated ouradditional paid in capital pool (“APIC pool”) based on the actual income taxbenefits received from exercises of stock options granted after the effectivedate of SFAS 123 using the long method. The APIC pool is available to absorbany tax deficiencies subsequent to the adoption of SFAS 123(R).

 

## **ITEM 3.  Quantitative and Qualitative Disclosuresabout Market Risk**

## ** **

There have been no material changesregarding the Company’s market risk position since the filing of its AnnualReport on Form 10-K for the fiscal year ended May 31, 2007.  For further details regarding thequantitative and qualitative disclosures about market risk, see Item 7A,Quantitative and Qualitative Disclosures About Market Risk, contained in theCompany’s Annual Report on Form 10-K for the fiscal year ended May 31,2007.

 

## **ITEM 4.  Controls and Procedures**

## ** **

As required by Rule 13a-15 under the SecuritiesExchange Act of 1934, an evaluation was carried out under the supervision andwith the participation of our management, including the Chief Executive Officerand Chief Financial Officer, of the effectiveness of the design and operationof our disclosure controls and procedures as of February 29, 2008.  Based upon our evaluation, our ChiefExecutive Officer and Chief Financial Officer have concluded that, as of February 29,2008, our disclosure controls and procedures were effective to providereasonable assurance that information required to be disclosed in the reportsthat we file or submit under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified in theapplicable rules and forms, and that it is accumulated and communicated toour management, including our Chief Executive Officer and Chief FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosure.

 

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There were no changes in our internal control overfinancial reporting during the quarter ended February 29, 2008 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

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**PART II**

 

**OTHERINFORMATION**

 

## **ITEM 1. LegalProceedings**

## ** **

*FTC Investigation*

On October 12, 2007, we received a letter fromthe Federal Trade Commission (“FTC”) requesting that we voluntarily providecertain documents and information to the FTC concerning three acquisitions madeby us in the period from 1996 through 1999, and concerning our product pricingactivities since then.  The letter statesthe request is part of a non-public investigation by the FTC of whether weviolated federal antitrust laws or engaged in unfair methods of competitionthrough those acquisitions, and whether we or others engaged in unfair methodsof competition by restricting price competition.  The FTC letter states that neither the letternor the existence of the investigation indicates that the FTC has concludedthat we or anyone else has violated the law. We intend to cooperate with the FTC in this investigation, and are inthe process of responding to the FTC’s request. At this time we cannot reasonably assess the timing or outcome of theinvestigation or its effect, if any, on our business.

 

Other than as set forth above or as previouslyreported in our Annual Report on Form 10-K for the fiscal year ended May 31,2007, as amended, we are not currently subject to any material legalproceedings, nor, to our knowledge, is any material legal proceeding threatenedagainst us.  However, from time to time,we may become a party to certain legal proceedings in the ordinary course ofbusiness. Management does not believe any ongoing legal proceedings, includingthose summarized above, will have a material adverse effect on our consolidatedfinancial position.

 

## **ITEM 1A.  Risk Factors**

## ** **

As noted in Part I,Item 1A of our Annual Report on Form 10-K for the year ended May 31,2007, in fiscal 2007 approximately 80% of our revenues and 95% of our netincome were generated from sales in North America, and these results could besignificantly and negatively impacted if current or new competitors increasedtheir competition based on price, thereby potentially reducing our market shareand gross margins.  In September 2007Alba Bioscience, a Scottish company with US operations in Durham, NorthCarolina, announced it had received US FDA clearance to market 15 monoclonalblood grouping reagents, including some not previously available in theUS.  If Alba enters the North Americanmarket, their entry, together with the expected entry of Biotest, Bio-Rad andothers noted in our Annual Report on Form 10-K, would create additionalcompetition.

 

There have been no othermaterial changes to the risk factors set forth in our Annual Report on Form 10-K.In addition to the other information set forth in this report, you should carefullyconsider the factors discussed in Part I, Item 1A, “Risk Factors” inour Annual Report on Form 10-K which could materially affect our business,financial condition or future results. The risks described in our Annual Reporton Form 10-K are not the only risks facing the Company. Additional risksand uncertainties not currently known to us or that we currently deemimmaterial also may have a material adverse effect on our business, financialcondition and/or operating results.

 

## **ITEM 2.     Unregistered Sales of Equity Securitiesand Use of Proceeds**

## ** **

TheCompany did not sell unregistered securities during the period covered by thisreport. The Company did not repurchase any shares of its common stock under itsstock repurchase program during the quarter ended February 29, 2008.

 

## **ITEM 6.  Exhibits**

## ** **

| 2.1    |   | Agreement of Plan and  Merger by and among the Company, BioArray Solutions Ltd. And Matrix  Acquisitions Company, Inc. dated March 11, 2008 (incorporated by  reference to Exhibit 2.1 to Immucor, Inc.’s Current Report on  Form 8-K filed on March 17, 2008). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                               |
| 31.1   |   | Certification of  Principal Executive Officer Pursuant to Rule 13a-14(a) and  Rule 15d-14(a).                                                                                                                                                                                       |

 

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| 31.2   |   | Certification of  Principal Financial Officer Pursuant to Rule 13a-14(a) and  Rule 15d-14(a). |
|--------|--------|--------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                         |
| 32.1   |   | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.   |
|   |   |                                                                                                         |
| 32.2   |   | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.   |

 

# SIGNATURES

#  

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

IMMUCOR, INC.

(Registrant)

 

 
| Date:  | April 2, 2008 |   | By:                                                           | /s/ Dr. Gioacchino  De Chirico |
|--------|--------------------|--------|---------------------------------------------------------------|-------------------------------------|
|   |               |   | Dr. Gioacchino De  Chirico, Chief Executive Officer      |
|   |               |   | (on behalf of  Registrant and as Principal Executive Officer) |
|   |               |   |                                                          |
|   |               |   |                                                          |
| Date:  | April 2, 2008 |   | By:                                                           | /s/ Richard A. Flynt                |
|   |               |   | Richard A. Flynt, Chief  Financial Officer                    |
|   |               |   | (Principal Financial  and Accounting Officer)                 |

 

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**EXHIBIT INDEX**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                    |
|------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                               |
| 2.1        |       | Agreement of Plan and  Merger by and among the Company, BioArray Solutions Ltd. And Matrix  Acquisitions Company, Inc. dated March 11, 2008 (incorporated by  reference to Exhibit 2.1 to Immucor, Inc.’s Current Report on  Form 8-K filed on March 17, 2008). |
|       |       |                                                                                                                                                                                                                                                                                               |
| 31.1       |       | Certification of  Principal Executive Officer Pursuant to Rule 13a-14(a) and  Rule 15d-14(a).                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                               |
| 31.2       |       | Certification of  Principal Financial Officer Pursuant to Rule 13a-14(a) and  Rule 15d-14(a).                                                                                                                                                                                       |
|       |       |                                                                                                                                                                                                                                                                                               |
| 32.1       |       | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                         |
|       |       |                                                                                                                                                                                                                                                                                               |
| 32.2       |       | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                         |

 

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